Opening Grain Market Comments - USDA Report Preview Numbers

Markets are called are called mixed to better this a.m. behind mixed overnight session and ideas of short covering ahead of Monday’s USDA Supply and Demand Report.

When the overnight session ended corn was down 1, KC wheat was up 3 cents, MPLS wheat was up 3, CBOT wheat was up 3, and soybeans ranged from up 8-11 on the various months.  At 8:20 outside markets have crude up a buck, the DOW futures off about 30 points, gold off a buck, and the US dollar up a 100 ticks or so at 81.10 on the cash index.

It looks like it’s about what the funds want to do and then hurry up and wait for the USDA report on Monday.  Funds are short some corn and wheat so could we see a little short covering ahead of the report?

As for beans I have seen several end users firm up their basis levels in the past few days.  Producer selling for old crop is light and we have seen a small bounce in the posted basis levels in many areas.  One local SD processor is posting 30 cents better this a.m. then they did on Wednesday.  The old crop bean situation is tight and mother nature is not helping the end users find new crop early. 

Corn basis has also felt firmer the past few days; but I have also seen some drop bids.  One of the ethanol plants we ship to now claim to be covered on rail corn until October.  I also seen a couple shuttle/exploder buyers drop some old crop bids yesterday.  I think the old crop corn situation will be very choppy; if someone needs it they probably have to pay up because it is hard to find.  If they don’t need it and places get full or covered it will be hard to move it at much if any premium to new crop.  Locally it feels like we are getting near the stage where it might get hard to move; but it really depends when we actually can get some new crop coming off.

The birdseed market continues to see the buyers running for the hills.  I do think if we can get bean oil to stabilize and bounce that they will be in buying.  But right now they are all thinking that corn and beans are going to lose another 50 cents to buck or more.  So they wait as they see big crops with a lack of issues and thus they think prices are going to get cheaper.  They don’t want to have high priced product on the store shelves should their competitors end up buying stuff cheaper.  So they are all in the sit and hold.  I have a feeling that we are only one catalyst away from many coming all in at once to try and buy; but we need that catalyst first.

As for the USDA report here is a recap of the estimates.  This comes from the Van Trump report.

US 2013/14 Production Estimates

	August Est.	Average	Range	2013	2012
Corn	slight increase	14.036	13.485-14.384	13.950	10.780
Corn Yield	slight increase	158.0	155.1-161.2	156.5	123.4
Soybeans	slight decrease	3.35	3.268-3.42	3.420	3.015
Soybean Yields	slight decrease	43.7	42.5-44.5	44.5	39.6

US 2012/13 Wheat Production

	August Est.	Average	Range	2013	2012
All US Wheat	slight increase	2,120	2,079-2,150	2,114	2,269
All Winter Wheat	slight increase	1,545	1,517-1,570	1,543	1,645
Spring Wheat	slight increase	514	474-538	513	542
Durum Wheat	slight increase	59	56-62	58	82

US 2013/14 Ending Stock Estimates

	August Est.	Average	Range	July
Corn	slight increase	2,013	1,498-2,367	1,959
Soybeans	decrease	262	131-325	295
Wheat	slight increase	579	509-653	576

US 2012/13 Ending Stock Estimates

	August Est.	Average	Range	Previous USDA
Corn	small decrease	722	537-750	729
Soybeans	small decrease	123	110-135	125

US 2013/14 World Ending Stock Estimates

	August Est.	Average	Range	Previous USDA
Corn	increase	152.36	148.0-159.0	150.97
Soybeans	slight increase	74.39	72.5-76.0	74.12
Wheat	decrease	171.10	168.0-174.0	172.38

US 2012/13 World Ending Stock Estimates

	August Est.	Average	Range	2013	2012
Corn	slight increase	124.33	123.0-126.8	123.57	132.42
Soybeans	slight decrease	61.46	61.0-62.5	61.52	54.98

When we have reports what I like to do ahead of them is look and see where the market might be leaning.  Where is the most risk at?  Where is the most reward at?  What do the estimates say as far as what is built into the market?  I am not going to spend much time on my opinion as to what I think the USDA will show; because what I see happening is a report that hopefully finally builds into it all of the negative aspects that we have traded over the past several weeks.  Hopefully it is a catalyst that says ok, now what.

As for areas of risk the one thing that stands out to me a little bit is the soybean yield.  You will notice above that everyone is at or lower than the present USDA number.  Looking at the weekly crop condition ratings is it possible that the yield actually goes higher??????  As for reward I would think that any of the bottom end production or carryout estimates could spark some fireworks with how the funds look to be sitting heading into the report.  I also think that wheat demand has been strong enough and we have enough small issues around the world that perhaps we could see both the world and US balance sheets tighten up a little more than expected.  Will corn still be king or could wheat lead the row crops higher?

I could spend hours talking or writing about the report with all the possible outcomes.  The bottom line heading into a report is to get one self in a comfort zone and how one gets there is different for everyone.

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