USDA will release the Supply and Demand Report Wednesday, and, as usual, it represents an untimely truth for this grain market columnist.
I write this on Monday before the market opens, and the reader gets this Thursday, after the report and after some market reaction to it.
The numbers
Monday, the markets were sharply mixed, with corn up 4 cents, but soybeans down 28-1/2 on the November contract. September wheat was up nearly 5 cents.
Overnight, the mood changed in the electronic bean trading. Soybeans got back 17-1/4 cents, much of the Monday loss. Corn continued higher, up most of another 4 cents, and wheat was up over 4 cents.
For perspective, the corn market has taken a beating lately, but the beans had been on a rebound. December corn futures had a high in early June, the dark ages now, at 4.73-1/2.
That’s volatile
Of course, at that time the magic number for forward selling seemed to be much higher. We broke over $1.50 to 3.14-3/4 in late July. In 10 sessions, however, we put 61 cents back on, then lost 55 cents in the next week. That more or less defines volatility!
Currently, the overnight is up near 3.30 December, a bounce off the low. Trading is likely to be slow during this one day anticipation, but anything can happen.
The traders now say they are looking for the Supply and Demand Report to show a decrease in the old crop carryover to 1.748 billion bushels from the 1.77 shown last month. No big deal.
Bigger issue
The bigger deal is the expected new crop carryover, what is left over Aug. 31, 2010, to 1.7 billion bushels. That is up from the 1.55 billion in the last report.
Keep in mind that we consider the level where supply gets “tight” at an even 1 billion bushels. This comes primarily from a crop of 12.5 billion bushels instead of the last estimate of 12.29 billion.
It should interest the reader that while the farmers are talking about the coldest summer on record and lack of heat units to make corn yields, the pros are talking about no yield-limiting heat spells and a huge crop.
Beans guess
The average trade guess for beans is a different matter. There, most are looking for a smaller crop, and a smaller carryout. They also look for the old crop carryout to get smaller. That is what we have left right now.
The average guess is for soybean production is 3.225 billion bushels , down from the 3.26 estimate in July. They expect
USDA to estimate an old-crop carryout of only 104 million bushels, instead of 110 in the July report.
The new crop is now estimated by traders at 212 million bushels instead of the 250 million in the July report.
The case could be made that the report should be bearish for corn and bullish for beans. In fact, we have been sharply lower in corn and higher in beans recently, so that may not be true.
My thoughts
I lean toward the idea that we will get a quick knee-jerk reaction, that is bearish for corn and not beans, then we will go back to trading the recent trend.
That is, if the USDA agrees with the traders, the report is already in the market. A surprise will make us all cranky.
(Marlin Clark trades producer and elevator grain for Keystone Commodities from an office near Andover, Ohio. He welcomes your comments at 866-293-4433.)
