The following is Farms.com Risk Management's Managing Commodity Strategist Moe Agostino's weekly commodity round up for the week ending January 20th.
Corn, wheat, and soybeans bearish
Corn rallies
Corn futures rallied up 14 per cent in the last three to four weeks largely due to some very dry weather in Argentina. Many analysts were lowering corn production for Argentina and the USDA confirmed that on Jan. 12 in their monthly crop production report. They lowered Argentinean corn production from 29 million metric tones to 26 million metric tons. Some analysts are as low as 22 million metric tons. We still have about another month and a half of dry weather that we have to contend with before they start to harvest so that could still continue to play a role with futures. However, on Jan. 12 it’s mostly about the USDA report as well as the grain stocks report.
The USDA reported that corn ending stocks came in at 846 million. That’s two million less than last month, but it’s about 96 million bushels more than the market was expecting at 750 million bushels. Average corn yield jumps to 147.2 from last month at 146.7, also higher than expectations at 146.4 bushels per acre. Corn production jumps to 12.358 billion versus expectations at 12.2. Exports were increased by 50 million to 1.65 billion bushels. Global corn production also increases to 868.06 million metric tons. The U.S. corn stocks came in at 9.642 billion bushels verses expectations of 9.4.
Overall, this report is bearish for corn futures. It looks like the limit move down now is 40 cents per day, largely because the numbers came in higher than expectations.
Surprising Soybeans
Soybeans are up by 12.6 per cent in the last three or four weeks, largely due to higher corn futures. Corn is the king in the United States. It’s the main driver right now and the one producers need to look to for direction going forward. It’s also due to some of that dry weather in South America.
The USDA reported that soybean ending stocks came in at 275 million bushels. That’s 45 million more bushels than last month with expectations of 230 million bushels. Soybean yields increased slightly to 41.5 versus expectations of 41.3. That was the number last month as well. Harvested acres were dropped by 0.1 to 73.6 from 73.7 million acres last month. Soybean production reported 3.056 billion bushels verses expectations of 3.046 billion. Crushings we lowered by 10 million bushels while exports were lower by 25 million bushels.
The 2011/2012 global soybean production drops 257 million metric tons down from last month at 259.22 million metric tons.
Argentina’s soybean production drops to 50.5, down 1.5 from 52 million metric tons last month, and Brazil soybean production also dropped by one million metric tons to 74 million metric tons from last month at 75 million metric tons. U.S. quarterly soybean stocks came in at 2.366 billion bushels versus expectations of 2.324 billion bushels. If there was a surprise in the Jan. 12 USDA report, it was that soybean ending stocks came in much higher than expectations at 275 million at the upper end of the range expected which was 127 to 285 million metric tons.
Wheat futures neutral
Chicago wheat futures were up about 16.1 per cent in sympathy with the rising corn and soybean futures in the last two to four weeks. In the Jan. 12 USDA report, the USDA reported that ending stocks for the marketing year 2011/2012 came in at 870 million bushels, 30 million more than expectations of 840 bushels and slightly lower than last month at 878 million bushels. Food usage was down five million while exports were increased by 25 million bushels. The 2011/2012 global wheat production continues to grow, now up to 691.50 million metric tonnes. That’s up from last month at 688.97 million metric tonnes. U.S. wheat stocks came in at 1.656 billion bushels vs. expectations of 1.68 billion bushels. The good news? This report was actually neutral for wheat futures. They’ll continue to follow corn and soybean futures.
Overall, the USDA was bearish across the board. It looks like a limit move down initially but this game’s not over. The USDA has surprised us a lot in 2011 and continues to do so. This will create some damage on the technical charts. The next big report will be at the end of March with the USDA March Planting Intentions Report and if we are going to plant 94 million plus corn acres in the United States in 2012, producers need to look for opportunities to do some hedging as supply could be very large in the fall of 2012 if Mother Nature provides a good growing season.
Once we get past this report, the market is going to have very little fundamental news to chew on. Lower prices will only create more demand so downside from here is perhaps limited as we need to still ration demand and buy acres for 2012. A retest of the low in May and September of 2011 at $5.80 is very possible.
Moe Agostino is a commodity analyst with Farms.com.
Corn, wheat, and soybeans bearish
Corn rallies
Corn futures rallied up 14 per cent in the last three to four weeks largely due to some very dry weather in Argentina. Many analysts were lowering corn production for Argentina and the USDA confirmed that on Jan. 12 in their monthly crop production report. They lowered Argentinean corn production from 29 million metric tones to 26 million metric tons. Some analysts are as low as 22 million metric tons. We still have about another month and a half of dry weather that we have to contend with before they start to harvest so that could still continue to play a role with futures. However, on Jan. 12 it’s mostly about the USDA report as well as the grain stocks report.
The USDA reported that corn ending stocks came in at 846 million. That’s two million less than last month, but it’s about 96 million bushels more than the market was expecting at 750 million bushels. Average corn yield jumps to 147.2 from last month at 146.7, also higher than expectations at 146.4 bushels per acre. Corn production jumps to 12.358 billion versus expectations at 12.2. Exports were increased by 50 million to 1.65 billion bushels. Global corn production also increases to 868.06 million metric tons. The U.S. corn stocks came in at 9.642 billion bushels verses expectations of 9.4.
Overall, this report is bearish for corn futures. It looks like the limit move down now is 40 cents per day, largely because the numbers came in higher than expectations.
Surprising Soybeans
Soybeans are up by 12.6 per cent in the last three or four weeks, largely due to higher corn futures. Corn is the king in the United States. It’s the main driver right now and the one producers need to look to for direction going forward. It’s also due to some of that dry weather in South America.
The USDA reported that soybean ending stocks came in at 275 million bushels. That’s 45 million more bushels than last month with expectations of 230 million bushels. Soybean yields increased slightly to 41.5 versus expectations of 41.3. That was the number last month as well. Harvested acres were dropped by 0.1 to 73.6 from 73.7 million acres last month. Soybean production reported 3.056 billion bushels verses expectations of 3.046 billion. Crushings we lowered by 10 million bushels while exports were lower by 25 million bushels.
The 2011/2012 global soybean production drops 257 million metric tons down from last month at 259.22 million metric tons.
Argentina’s soybean production drops to 50.5, down 1.5 from 52 million metric tons last month, and Brazil soybean production also dropped by one million metric tons to 74 million metric tons from last month at 75 million metric tons. U.S. quarterly soybean stocks came in at 2.366 billion bushels versus expectations of 2.324 billion bushels. If there was a surprise in the Jan. 12 USDA report, it was that soybean ending stocks came in much higher than expectations at 275 million at the upper end of the range expected which was 127 to 285 million metric tons.
Wheat futures neutral
Chicago wheat futures were up about 16.1 per cent in sympathy with the rising corn and soybean futures in the last two to four weeks. In the Jan. 12 USDA report, the USDA reported that ending stocks for the marketing year 2011/2012 came in at 870 million bushels, 30 million more than expectations of 840 bushels and slightly lower than last month at 878 million bushels. Food usage was down five million while exports were increased by 25 million bushels. The 2011/2012 global wheat production continues to grow, now up to 691.50 million metric tonnes. That’s up from last month at 688.97 million metric tonnes. U.S. wheat stocks came in at 1.656 billion bushels vs. expectations of 1.68 billion bushels. The good news? This report was actually neutral for wheat futures. They’ll continue to follow corn and soybean futures.
Overall, the USDA was bearish across the board. It looks like a limit move down initially but this game’s not over. The USDA has surprised us a lot in 2011 and continues to do so. This will create some damage on the technical charts. The next big report will be at the end of March with the USDA March Planting Intentions Report and if we are going to plant 94 million plus corn acres in the United States in 2012, producers need to look for opportunities to do some hedging as supply could be very large in the fall of 2012 if Mother Nature provides a good growing season.
Once we get past this report, the market is going to have very little fundamental news to chew on. Lower prices will only create more demand so downside from here is perhaps limited as we need to still ration demand and buy acres for 2012. A retest of the low in May and September of 2011 at $5.80 is very possible.
Moe Agostino is a commodity analyst with Farms.com.