USDA REPORT TOMORROW. ARE YOU PREPARED?

Written By Sebastian Frost

GRAIN AUDIO COMMENTS & MARKET UPDATE

  • Report has potential to set the stages for months

  • Be comfortable knowing this report could end our lows or keep sending us lower

  • What does the market think is “not possible”?

  • Ways to manage your risk ahead of the report

  • Exact hedging strategies to use for your situation

  • How to take advantage of the USDA volatility

  • What to do if you’ve made sales, need to make some, need protection etc.

  • Who should be waiting and who should be using calls or puts before the report?

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Pre-Report Breakdown

A pretty disappointing day ahead of tomorrow’s USDA report. As all the grains close essentially lower. March beans were up +13 cents early on but closed unchanged. Corn was slightly lower while wheat took a little beating.

We got our first flash sale of the year this morning, with a sale of 175k metric tons of corn to Mexico.

The weekly export sales were terrible across the board.

We have a brutally color storm moving across the midwest with temps below 0 degrees. In areas that don't have snow cover, there is the potential threat of winter kill for the wheat crops. However the market doesn't see this as much of an issue.

Then tomorrow we have the highly anticipated USDA report.

It seems like nearly everyone is expecting a fairly bearish report.

This report can bring surprises. So what are some surprises to look out for?

The trade is expecting US yield to come in unchanged from November. No one is expecting yield to increase. So yes, that is a possibility and a risk. Especially considering all of the areas where it looked like they wouldn't have much of a crop end up having a decent one.

On the other side of things, I am hearing some talk that they might lower soybean yield slightly by a tenth of a bushel. Now this wouldn’t be crazy bullish by any means, but this would make a slight impact to our already tight carryout situation.

Wheat seedings is another one to look out for. This has brought some surprises over the years. Last year the market was shocked as they came in +7% higher than the expectations.

Here is a chart from Karen Braun that shows the history of winter wheat seedings.

Now let's take a look at US ending stocks. The trade sees basically no changes to soybeans and wheat, with a slight decrease to corn.

For reference compared to 2022/23 the estimates reflect the following year over year changes: +55% for corn, -8% for beans, and +15% for wheat.

The biggest thing everyone will be watching for is South America, Brazil in particular.

This morning Brazil consultancy Patria Agronegocios put out their estimates and they are some of the lowest I have seen. They have beans at 143 vs their previous estimates of 150.7.

Yesterday the CONAB had their numbers at 155.27 for beans and 117.6 for corn.

How does this stack up vs the USDA pre report estimates?

USDA trade estimates have 156.26 for beans and 125.33 for corn.

Now everyone and their dog expects the USDA to…….

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Sebastian Frost
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PREPARING FOR THE USDA REPORT