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Re: Grains, big report opening calls
In Response To: Grains ()

USDA data seen bullish
Mike McGinnis 01/11/2011 @ 7:13pm

CHICAGO, Illinois (Agriculture.com)--The USDA released bullish Crop Report data Wednesday, market traders and analysts say.

In its January World Agricultural Supply and Demand Estimates (WASDE) Report, the USDA dropped the U.S. 2010 corn and soybean production and ending stocks. Worldwide, the USDA cut the Argentine corn production estimate, due to a continued drought weather pattern that is hurting that country's pollination season.

As a result of the USDA numbers, CME Group floor traders see the Wednesday Early Calls as follows; corn up 7-10 cents, soybeans up 15-20 cents, and wheat 10-15 cents higher.

Jack Scoville, PRICE Futures Group vice-president, says the report is friendly, but not surprising. "No shocks at first glance this morning, but there is really nothing negative here as well. Only wheat seedings could be construed as potentially a little bearish, I suppose. But not really. Stocks and production and ending stocks estimates are all at the lower end or below trade estimates," Scoville says.

He adds, "We were strong overnight and the dollar is lower. So, we should be able to at least maintain the overnight gains and possible move higher."

Matt Pierce, GrainAnalyst.com analyst and CME Group floor trader agrees the WASDE Report is friendly for grain prices. "Bullish report but nothing dramatic. The USDA hedged bets again by leaving corn exports flat and lowering feed. My question is, if you lower feed in wheat and corn what's left for the livestock to eat?"


For corn, the USDA estimates 2010-11 production at 12.447 billion bushels, below the average trade estimate of 12.491 billion and below the USDA's December estimate of 12.540 billion bushels. The U.S. corn yield is estimated at 152.8 bushels per acre, lower than the average analysts estimate of 153.9 and the USDA's December estimate of 154.3.

For soybeans, the USDA lowered the U.S. 2010 production at 3.329 billion bushels, below the average trade estimate of 3.376 billion bushels and the USDA's December estimate of 3.375 billion. In its report Wednesday, the government agency dropped the U.S. 2010 soybean yield at 43.6 bushels per acre vs. the average trade estimate of 44.0 bushels per acre and the USDA's December estimate of 43.9.


As of December 1, 2010, the USDA estimates the U.S. corn stocks at 10.039 billion bushels compared to the average trade estimate of 10.097 billion bushels. For soybeans, 2010 grain stocks are estimated at 2.277 billion bushels, compared with the average trade estimate of 2.333 billion bushels. Wheat grain stocks, as of December 1, 2010, are estimated at 1.928 billion bushels vs. the average trade estimate of 1.937 billion bushels.


The USDA says the U.S. corn ending stocks are pegged at 745 million bushels, compared to the average trade estimate of 779 million bushels and the government's December estimate of 832 million bushels. Meanwhile, the USDA estimates the 2010/11 U.S. soybean ending stocks at 140 million bushels vs. the average trade estimate of 156 million and the USDA's December estimate of 165 million bushels. For wheat, the USDA estimates 2010/11 ending stocks at 818 million bushels vs. the average trade estimate of 849 million and the USDA's previous estimate of 858 million bushels.


The USDA lowered the Argentine corn production estimate to 23.5 million metric tons, compared to its December estimate of 25.0 million metric tons.

Jason Ward, Northstar Commodity Investment Co., says the report is most bullish for the soybean complex. "Aside from the friendly report, the only negative I see to soybeans is the wetter forecast in South America (Argentina mainly)."

The one disagreement the trade might have with the USDA is the fact it left U.S. corn exports unchanged. "We need to start seeing more business to reach that figure," Ward says.

Argentine production was lowered by USDA, but not nearly as low as the private sector is already anticipating (already trading) so that could be viewed as bearish, Ward says.

"European markets are considering the report very bullish, as corn is trading 30 cents higher over there and wheat is 18 cents higher," Ward says.

Ward adds, "It's nice to see something from USDA that is actually predictable, regarding this report. They gained some credibility in the analytical world (not like they care about our opinion), but when guys like us sit down and calculate every category and can get within 20 million of what USDA says it certainly helps position customers correctly."

Tim Hannagan, PFGBest.com senior grain analyst says the question after the report is will funds sell after the report is priced in. "Or, will the funds continue buying the weather until Argentine crops are done growing, with a break coming later in February. Stay tuned, as we may have to rely on technicals and charts to signal a sell or buy. Similar to a pilot flying off gauges."

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Re: Grains, big report opening calls