I love it when significant reports come out the day before my column deadline! (It seems like the big news always comes just after, so that I end up writing from a position of even more speculation than ever.)
The January reports wrap up the hard, fundamental information we have about the last year’s crop. As such they are a cornerstone of the next few months of marketing.
Rarely are there surprises, since we have good information with the estimates in the previous Crop Production Reports from USDA. They are considered, however, to have the most accurate information, and are considered inventory reports since actual grain in the bins can be counted.
On Monday we saw numbers that were no shock, but were adjusted just enough to influence markets.
Soybeans, for example, put in a range of 46 cents from high to low, then closed down 36 1/2 cents. Traders encouraged by early higher trading were blown out when USDA contributed to the big losses when the reports were released at 11 a.m.
In reality, USDA did not change soybean numbers much, but they were in the wrong direction. The yield was tweaked from 47.5 bpa to 47.8. The harvested acres were dropped a tad from 83.403 million to 83.1. The slight yield increase overcame the acres, and the crop increased from 3.958 billion bushels to 3.969. That helped the carryout go from .393 billion to .410.
None of this sounds like much, but traders are a lot more comfortable with carry above 400 million bushels.
Remember, we have had tight supply problems the last two years in late summer. We have imported soybeans (ugh!) and only got bailed out once by an early harvest.
In early trading Tuesday, soybeans are rebounding. Traders may be having thought that they over-reacted. March futures are up over 7 cents, at 10.21 1/4. Looking at recent history, the recent high was at 10.68 1/2 on the 29th. We got close to that before the report Monday, at 10.61 1/2. The high before that, on Dec. 10, was 10.66 1/4. The contract high for the March bean contract was at 10.89 3/4.
See the trend here? We get stalled below 10.90, and now are trading 70 cents below that. So, we have a long way to go if we are to see a new high in beans. If.
The corn futures are a little different. There we closed on a positive note Monday, up nearly 2 cents, and added 3 cents on early Tuesday. We are trading 4.05 1/4 on Tuesday morning, not quite 12 cents off the contract high made Dec. 29. In this case, a new high seems more likely, although I am not actually bullish.
USDA cut the corn yield from 173.4 bpa to 170. The harvested acreage was virtually the same, so the crop ended up at 14.216 billion bushels, down from the November report of 14.407. Again, this is not a big adjustment, but it is in the right direction for the farmer.
In the process, USDA cut the carryout for corn to 1.877 billion bushels, down from the 1.998 billion of the December report. This is significant. One billion is considered “tight” supply. Two billion is “sloppy.” We have gone from “sloppy” to almost sloppy. The difference will be recognized in grain checks.
Again, I am not bullish, but I am friendly to the idea of new highs. We can’t have high prices without a 1 billion carryout in corn. We have to look to the new crop for help there.
While this was going on, wheat was continuing to slide. Monday March Chicago wheat futures dropped to a low of 5.54 and closed down over 8 cents. They recovered nearly half of that early Tuesday. The trend is still down, with a loss of almost $1.25 since the middle of December.
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