GARBAGE REPORT AS EXPECTED & CHINA STOCK PILES GRAIN

Written By Sebastian Frost

USDA REPORT RECAP: AUDIO & WEEKLY WRAP

  • We got garbage as expected

  • Report was overall neutral but markets lower

  • Corn & wheat carry out lower. More to come?

  • Kicked can on Brazil crops

  • Second corn crop problems

  • The Brazil situation could be resolved, but it’s worse than the USDA wants to admit. Will need a trend change

  • China is stock piling grain.. why?

  • What to do if you need to sell soon

  • Time to lock fuel needs in?

  • Make sure you read our Weekly Wrap below*

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WEEKLY WRAP

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Overview

Today's weekly wrap will be shorter and different than our usual ones on Friday due to to the USDA report today.

Make sure you check out today's audio above as well to get a full breakdown of the numbers, what it means, and our current outlooks moving forward.

As for the USDA report, you can probably guess what happened..

The USDA decided to kick the can down the road on the Brazil crop. No surprise, as we mentioned that would likely be the case yesterday.

Brazil beans came in down 2 million metric tons from last month, but 1 million higher than the trade was anticipating. Coming in at 161 million vs 160 estimates and last months 163.

Brazil corn unchanged from last month at 129 million, which was 2 million higher than the trade guesses as they were predicting 127.

Argentina crop for both corn and beans were unchanged from last month.

Brazil Producer Diego Meurer:

“While USDA and CONAB continue to report a super harvest, Mato Grosso and other areas are decimating the main soybean areas in Brazil due to severe drought and the south due to excess water. Which sharks are financing these reports?”

Jason Britt, President of Central States Commodities:
"Report out of the way and they still need to get the rain or no way they will be even close on these numbers. They will be way too high, but that's par for the course with the USDA. They over estimate production over and over again."

I completely agree with Jason, if this trend remains dry, which it looks like it will. Them not making major cuts today gives us all the more power to see an even larger cut down the road.

Outside of South America, there wasn’t anything major. However, the surprise of the report  was that US wheat ending stocks saw a big cut.. yet the market sold off.

Bulls were also happy to see the USDA raise corn exports by +25 million bushels. which reduced ending stocks by -25 million

Here were the US and World ending stock numbers:

Corn and wheat came in below expectations while the balance sheet for soybeans remained the same.

Charts from Karen Braun


So why did wheat sell off despite the cut to ending stocks?

Mostly just profit taking. We said yesterday we should be expecting this rally to take a breather, which has happened. That is completely natural after an +85 cent rally. It's not healthy for markets to go up and up in a straight line. 

Even with the sell off today, prices Chicago wheat is still up nearly +30 cents on the week and +75 cents off their lows from last week alone.

Now back to Brazil.

I just want to show you how off some of these rains in the forecasts have been and how they changed in 24 hours, the same ones that have pressured our markets from time to time.

These are from 247 Ag. He went on to say:

"The ECMWF forecast changed how much in 1 day? Beginning to come in line with the GFS model. Beans not planted or replanted by December 15th, begin to drastically change the Safrinha production outlook. More bullish for corn than soybeans. Soybeans will get planted, not corn."


I have been saying this for a while now.. the Safrinha corn situation is a major bullish wild card flying under the radar.

The first crop planted will always be the beans, not the corn. I simply think we could be looking at a lot less acres when the time comes.

When will the market come to realize this?

It might not be……

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Sebastian Frost
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