NEW LOWS IN CORN & USDA PREVIEW

Written By Sebastian Frost

MARKET UPDATE

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Overview

Corn and soybeans lower ahead of tomorrow’s USDA report as corn makes a new contract low. Trading to the lowest level in 3 years.

Tomorrow we don’t just have the USDA. We also get the CONAB numbers in the morning (South America's USDA) along with Stats Canada. So we will get a good data dump and tomorrow will be very interesting.

It is currently the Chinese New Year, so do not expect much business to be done out of China right now.

So why were lower today?

Argentina is expected to see some good rains that are expected to continue throughout the weekend to go along with cooler temps.

Then we have the funds and traders doing some pre-report positioning. Despite a lot of bearishness already priced in, the funds continue to pound the grains lower and won’t take their finger off the sell button. As we haven’t gotten any short covering.

The funds are now short nearly -300k contracts of corn. Which is a massive amount. The most ever for this time of year and the most since 2019.

From Mark Gold of Top Third:
"When they cover this stuff, I certainly wouldn’t want to be the first one to sell it."


USDA Preview

Let's take a look at the numbers for tomorrow.

First we have South America. Despite the recent drought concerns in Argentina, the USDA sees their production getting bigger from last month. The estimates are:

Argentina Corn: 55.7 vs 55 last month
Argentina Beans: 50.8 vs 50 last month

Then despite the weather being pretty friendly in Brazil recently, the analysts see Brazil's crop coming in smaller than last month.

Brazil Corn: 124.3 vs 127 last month
Brazil Beans: 153 vs 157 last month

There is a big range for the Brazil bean numbers of 148 to 157. However, the second lowest estimate is 150.4 and 10 of the 16 analyst estimates came in at 153 to 154.

If we were to come in exactly at these estimates, total Argentina and Brazil corn production would be down -2 million metric tons from last month to 180 million. But +9 million higher than last year's 171.

As for soybeans, total production from Argentina and Brazil would be down -3.2 million from last month to 203.8 million but still far higher than last year's 185 million due to Argentina expected to have double the bean crop this year (25 last year vs 50 this year).

There is not major changes expected from the USDA. The CONAB numbers might be more interesting, so see where they see Brazil production. Keep in mind CONAB last month had their numbers at 155 for Brazil beans and 117 for Brazil corn.

Don’t be surprised to see both the USDA and CONAB play this slow. They tend to always do this and might want to wait for more real results from the fields.

From Farms.com Risk Management:
"USDA & CONAB are notorious for being slow to adjust production lower. In last year's Argentina crops that were cut in half by drought, it was not until the summer that the USDA acknowledged lower numbers! Look for a similar pattern in this year's Brazil crops." "Look for the USDA to forecast a Brazilian soybean crop below 150 million metric tons by March crop report and below 145 by the summer of 2024."

Next we have the US carryout.

Corn is expected to see…….

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In the rest of today’s update we will be going over the USDA report, Argentina rain and the effects, potential heat and dryness in the US this summer, technicals, & more.

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Sebastian Frost
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WHAT IS EXPECTED FROM USDA & WAYS TO GET COMFORTABLE