USDA report day........Limit up here we come???

Markets are called sharply higher beans, wheat, and old crop corn behind a bullish USDA report.

Here is the report recap.

USDA NUMBERS
Planted Acreage Estimates (in millions of acres)
	USDA #s	Low Guess	Average Guess	High Guess	USDA Outlook	USDA Last Year
Corn	95.86	93.6	94.75	95.6	94.0	91.921
Soybeans	73.90	74.0	75.45	76.7	75.0	74.976
All Wheat	55.9	55.5	57.422	58.2	58.0	54.409
Winter	41.7	41.5	41.963	42.6	N/A	40.646
Spring	11.976	12.0	13.30	14.5	N/A	12.394
Durham	2.23	1.4	2.30	2.5	N/A	1.369

USDA NUMBERS
US Quarterly Grain Stocks as of March 1st (in billions of bushels)
	USDA #s	Low Guess	Average Guess	High Guess	USDA 3/1/11	USDA 12/1/11
Corn	6.01	5.925	6.150	6.288	6.523	9.642
Soybeans	1.37	1.270	1.387	1.585	1.249	2.366
Wheat	1.20	1.181	1.223	1.251	1.425	1.656

The above has what I call bullish numbers highlighted in green and bearish numbers in red.  You can see that one of the major headlines is corn acres and that is bearish versus last year as well as the estimate.  But the old crop quarterly stocks number probably more than off set’s the acreage and it could cause more diversion between the two also. 

The spring wheat acre number is very bullish on surface; but I do think we need to remember what happened on last year’s small crop; it ended up destroying demand.  We can’t afford a small crop with the low acres; but we also need to find a way to add some demand.  The birdseed sunflower market is a good example of what can happen; last year we had one of the smallest crops ever; but we also killed demand so much that today’s report shows sunflower stocks ahead of a year ago at this time.   Granted we almost ran out of sunflowers last year; but the fact that we haven’t exactly ran sunflower prices up should tell us too high of prices don’t help demand.

Bottom line even though this report is friendly for wheat we still need to add some demand; because if we just cut supply there is no gtd that a long term rally is sustainable. 

The one thing this report should do a little bit is fuel a little acre war debate; if you plug in the latest USDA demand projections with the bean acres you end up with a carry out that is in the red.  The report however doesn’t tell us how many acres have switched the past month.

I did notice a major buyer already up their spring wheat basis bids for new crop today.  That is one positive.

The lower corn stocks number also brings back into play possible needed price rationing and the China card.  What could happen to our stocks if China comes back in to buy; keep in mind their corn has been $10 or so; and with our price levels a couple of days ago they could buy our corn for their domestic market and make around $70 a ton from what I was told.

Overall this report should be took as bullish; but don’t forget to use proper risk management.   (Don’t be afraid to sell a little bounce) Keep in mind the price action we have seen the past couple of weeks; nothing fundamentally really changed it was simply money flow and with the funds at or near record soybean length we have be watch out for a turn in money flow.  After all eventually everything runs out of buyers or runs out of sellers as we near extremes. 

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