Futures Commentary and Analysis

Back

Is A USDA Shock Coming?
Brian Grossman - IF - Wed Jan 11, 4:00PM CST

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS ANDMAY NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.

Is A USDA Shock Coming?

It’s that time of the month again as the USDA is scheduled to release the monthly WASDE report Thursday, January 12th at 11am central time. However, this time around it is more than just the typical WASDE as we will also be getting a look at December 1st quarterly grain stocks, crop production and winter wheat planting acreage. With so many moving parts this report does have a history to not only be hard to estimate but also often offer a shock to the market. Needless to say, there is likely going to be fireworks of some kind come 11am.

The crop production side of these reports will be one of the key item to watch. The USDA is currently estimating corn yield at 175.3, new record, with production at 15.226 billion bushels. The average trade is estimating a yield reduction to 175.1; however as the saying goes, big crops get bigger; the average trade is expecting the soybean crop to grow with an average trade estimate of 52.7 vs the previous 52.5. If the average trade is accurate we will once again confirm not only is this crop massive but it is a new record yield for both. A great feeling for producers to pull a record yield but not great for prices.

--- Ag Hedge Newsletter – Get daily fundamental and technical updates for free. Sent by email each morning! Sign Up! http://www.zaner.com/offers/ag_hedge_newsletter.asp?ap=bgrossma

With updated crop yields we then tie into the supply and demand or WASDE portion of these reports. A positive that has helped greatly with overwhelming supply has been an equally impressive demand. As of Monday’s export inspections report; year to date corn has shipped 15,798,744 bushels compared to the same time last year that stood at 12,549,427. Soybeans have also shown excellent demand with shipments at 34,429,332 vs the same time last year at 29,181,832. Some may argue that demand is not only strong but may also be justified to be revised higher on this WASDE. However, while I agree that we may have room to increase export demand, I am also concerned that last week’s export sales was a warning shot of what may be to come. On January 6th export sales for corn came in below expectations and below the weekly requirement of 591.5 thousand metric tonnes to meet the USDA’s estimate. Then came the disappointing soybean number of only 87.5; well below recent weeks; below expectations and below the 222.4 thousand metric tonnes needed each week to meet the USDA estimate. This shock was due to a large cancelation of previous purchases at a time we expect to see exports begin to fade. While this could be related to the holiday season, I am more concerned that we are now seeing major purchases shift to South America as their harvest is getting started.

--- Zaner Text Notice (US Only) Sign up for free market price updates at 1130am and settlement prices as well as USDA reports. Also giving easy texting access to a Zaner Group Ag broker! Sign Up! http://www.zaner.com/landing/ag_hedge_text.asp?ap=bgrossma

Now if that wasn’t enough, we still have the December 1st quarterly grain stocks report to consider as well. With an average trade estimate for corn at 12.300 billion bushels, we may see a record amount of corn still in the hands of producers that has yet to be sold as last year’s stock number stood at 11.238 billion bushels. This could be a significant bearish influence as that grain still needs to be moved with a large chunk likely being moved in the near future leaving little reason for the market to have to try and entice producers to sell. Soybeans don’t appear much better with the average trade estimated at 2.935 billion bushels, above last year’s 2.715.

Looking at either row crops or wheat, there are a lot of moving parts coming at the market tomorrow with a good chance of a USDA shock to the market. Downside risk remains strong and producers need to be vigilant of price risk exposure they are willing to accept. Call in to learn more about our outlook not only for this series of reports but also for the upcoming year. Prices are down, risk is high and profit margins are slim. As I continue to mention in recent writings, a market plan may not have been critical to your operation a few years ago during high prices is now a critical aspect today. Don’t know where to start with your marketing plan? Call in! Don’t know what tools are available to help manage risk? Call in! I can be reached directly as 312-277-0119. There is nothing to lose with a call but there is potentially something big to gain.

Brian Grossman

Market Strategist

Zaner Group, LLC – Ag Hedging

(312) 277-0119

bgrossman@zaner.com

@AgHedgeGrossman
www.zaner.com

Forover 30years, Zaner has been helping futures, commodity and forex traders trade smarter, faster and easier. Zaner is an established, highly regarded award-winning execution and brokerage firm known for providing clients with exceptional service. Zaner covers a broad range of commodities with individual divisions which include agricultural, energies and metals. To learn more, sign up:

Ag Hedge Calendar – in US only
http://www.zaner.com/offers/calendar.asp?ap=bgrossma

Zaner Daily Commentary:
http://www.zaner.com/offers/?page=16&rID=twitter&ap=bgrossma

MarketHead Quotes/Charts/Technical Analysis:
http://www.markethead.com/2.0/?ap=bgrossma

Precious Metals:
https://zanerpreciousmetals.com/?affiliateid=bgrossma

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS ANDMAY NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.


Back
Markets: Currencies - Energies - Financials - Grains - Indices - Meats - Metals - Softs - Full List Contact Us