Opening Comments day ahead of USDA report 7-10-2013

Markets are called mixed as we wait for the USDA report tomorrow.

In the overnight session corn was down 2 cents, KC wheat was unchanged, MPLS wheat was unchanged, CBOT wheat was unchanged, and soybeans ranged from down 2 to up 3 cents.  At 8:20 outside markets have a US dollar off a couple hundred points, gold up 7 bucks, DOW futures pointing towards an unchanged start and crude up 2 bucks a barrel.

It’s about two things in our markets right now.  First off and probably most importantly it’s about weather.  I have seen more comments recently about heat dome’s and ridges as well as agronomic concerns ranging from the corn rolling, to bad bean stands, to bad corn root systems.  The market seems to be adding back some of the weather premium that it had took out; now for how long is the question.  It looks like a high percentage of corn will be pollinating towards the end of the month so each weather forecast could move our markets.

I am no agronomist and to be very honest to me it is hard to drive by a field and say this one has 150 potential and this one has 200 or 100.  Many producers are screaming about the crop conditions; some days the trade seems to care; many days it seems to be more of a rain makes grain trade; right or wrong.

The other thing it is about is the report tomorrow.  Most don’t look for tons of major adjustments; but the report probably tells us how important the weather becomes.  The thing to watch the could be the most bullish and also the most disappointing is the old crop stocks.  Are we at pipeline stocks so our old crop corn and soybean carryout’s don’t go much if any lower?  Or will tomorrow be the start of the biggest squeeze in history?

As for the new crop portion it is hard for me to think that the USDA prints something bullish.  Maybe they should; but if you look at the headlines since the last report you have to think that both corn and soybean production is up.  Will it be offset by demand?  If old crop ends up tighter that gives new crop less of a starting inventory spot.

Why do I think it will be hard for us to get a bullish new crop number.  Because of the two major headlines we have seen since the last report; about a month ago.  First off we had the June 28^thacre update; in which they increased acres for both corn and soybeans.   At one point the market had priced in less corn acres being planted; and hence the pressure on the market when we had more acres planted than expected.

Secondly and most importantly is the yield for this report has nothing to do with ear counts or pod counts.  I believe it just comes from statistics.  What statistic have we seen every week for the past month.  Crop conditions every Monday afternoon and they have improved or been flat every week for both corn and soybeans.  So if crop conditions are improving how can’t the USDA increase yield?

I know the agronomic debates and concerns that many have over our crop; but if you are looking at the headline of crop condition how has the crop got smaller over the past month if conditions have improved??????

Bottom line is I don’t see a bullish new crop number coming out on this report.  If a bullish new crop number happens we likely don’t see it until August or later.  Now that doesn’t mean that weather come Friday or Monday couldn’t have us off to the races; but that is still to be determined by mother nature.

 Here are the numbers, last month and trade estimates for the USDA Supply and Demand report that is out at 11:00.

These come from the Van Trump Report.

Take note that overall the market is looking for decreases in carryout’s almost across the board.  How bullish of a report has our market priced in the past couple of sessions?  Will the USDA have different logic then our traders figuring their carryout estimates?  Have to really believe the risk is for a negative curveball from the USDA report and believe that if we have bullish numbers we don’t see them for a few months.

US Carryout Stocks 2012/13 & 2013/14

	July Est.	June #'s	Avg. Trade Guess	Trade Range
2012/13
Corn	???	0.769	0.725	0.537 - 0.800
Soybeans	???	0.125	0.121	0.104 - 0.135
2013/14
Wheat	???	0.659	0.632	0.566 - 0.690
Corn	???	1.949	1.896	1.618 - 2.338
Soybeans	???	0.265	0.263	0.164 - 0.329

World Carryout Stocks 2012/13 & 2013/14

	July Est.	June #'s	Avg. Trade Guess	Trade Range
2012/13
Corn	???	124.310	124.222	122.600 - 127.590
Soybeans	???	61.210	60.938	60.185 - 61.300
Wheat	???	179.870	179.344	177.000 - 181.030
2013/14
Corn	???	151.830	152.404	149.700 - 158.897
Soybeans	???	73.690	73.557	69.486 - 75.000
Wheat	???	181.250	180.293	175.000 - 183.000

US All Wheat Production

	July Est.	June #'s	2012 Totals	Avg. Trade Guess	Trade Range
All Wheat	???	2.080	2.269	2.057	1.942 - 2.140
All Winter	???	1.509	1.654	1.507	1.454 - 1.555
Hard Red	???	0.781	1.004	0.773	0.730 - 0.808
Soft Red	???	0.509	0.420	0.525	0.478 - 0.552
White	???	0.219	0.222	0.214	0.199 - 0.220
Spring	???	NA	0.542	0.499	0.452 - 0.540
Durum	???	NA	0.082	0.063	0.055 - 0.080

Jeremey Frost

Grain Merchandiser