Farmers looking for good news in Tuesday’s USDA reports may be disappointed. Last week, I wrote that one early private report was fading production numbers, but that has not been the trend.
As we approach the report, the consensus of observers is that the production might be reported as higher, not lower. Yuck!
Friday, the consensus was that the estimate for corn production would come in at 13.579 billion bushels, as a result of 168 bpa. USDA in October said we realized 13.555 billion. This is not a huge difference, but it is in the wrong direction for those hoping for higher prices.
That same group of experts forming the consensus says we will end the year with 1.597 billion bushels. Remember that our benchmark for carryout is that we need to get below 1 billion to be considered “tight.”
Similarly, we are now estimating the soybean crop at 3.915 billion bushels, with an average yield of 47.5 bps. October USDA numbers reported 3.888 billion bushels of beans and a 47.2 bpa yield. This is a significant difference, and we need to watch this carefully.
As we hunt for good news, the market has mostly been in a narrow range for corn, and in a slowly declining one for the soybeans. December corn futures had the recent high at 3.99 3/4 on Oct. 7. In the last two weeks, however, prices have stayed between 3.87 1/4 and 3.70. That 3.70 was the low Friday, but we closed at 3.73.
The soybeans, on the other hand, have slowly slid from 9.23 1/2 on Oct. 14, to 8.58 on Friday. We rebounded Friday to a 8.67 1/4 close. On today, Monday, we are fractionally higher, looking for some reason to change before tomorrow’s USDA Crop Production and Supply and Demand Report.
So far the trading is slow and almost unchanged. Nobody seems to have much of an opinion with real news coming at noon tomorrow. That leaves us looking at other news tidbits.
Corn basis and bean basis are both strong, with the grain remaining in the bins. Bean basis is near option price at some processors. Corn basis has improved as much as 30 or 40 cents above harvest levels in some locations near hungry processors. This is purely a measure of demand.
With the Board weak, the basis has to do the work of inspiring farmer movement of grain. Speculators seem to be having negative thoughts about grain prices. The weekly Commitment of Traders Report from USDA tells us that the specs added 4,931 contracts to their already short positions last week, but they added 24,004 contracts to net short bean positions, which were already short over 50,000 contracts.
This means that to turn around prices we need to turn around the mood of the speculators.
This trend does not hold to wheat, where specs are getting a little less short, by almost 10,000 contracts. They remain 65,726 contracts short.
Looking at money, the dollar has been weak, but is still relatively strong enough to stifle exports, especially of wheat. Also, Fed chair Yellen is hinting that there may finally be an interest rate hike in December.
News for the wheat markets is mixed. The specs may be short, but the crop in Ukraine is short, and we may see export restrictions. Also, the Aussie crop is shortened by dry weather, and current wet conditions there may be just late enough to slow the harvest and not help the yield.
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