11-09-2011 06:37 AM - edited 11-09-2011 02:46 PM
VIDEO: Will a small crop get smaller? USDA NASS official visits with Marketeye
After the close:
Bryan Doherty, Stewart-Peterson Group research specialist says the marketd dropped Wednesday for a few specific reasons. "The report confirms tight corn and soy bean supplies, but it is old news. Europe will dominate news and could sink markets."
Wheat Options Talk:
Here is how one wheat options trader sums up Wednesday's market. "Closing implied volatility levels on Tuesday were not pumped up. So the idea that Wednesday's action would produce such a drastic collapse (-3% by the time we ended the day) says more about the collective positions being carried for the remainder of their short lives than any intraday paper flow in the wake of a fairly neutral USDA report. Tuesday's big uptick in daily volume (21,000) was short-lived, as things were back to pulling teeth for flow on Wednesday. 33% implied volatility in the front month Dec., with an atm straddle down to 36 a day removed from trading 43, represents a fresh low there. That's a one-day smack down sure to make more than a few traders holding what they thought was a manageable amount of Dec. premium blush. And keep in mind, there's certainly enough time remaining for the locals to be thouroghly tormented by the notion that these wheat futures are quite capable of moving 30 cents on any given day for less reason than one could ever have imagined back in the days of reliable liquidity.....or maybe not. Maybe we sit here for the duration, as extraneous factors create a volume and volatility vacuum that sucks the life out of whatever potential action we had left. All of the sudden, you've got a 36 cent straddle that you have no idea what to do with, other than roll the dice. Mar. implied volatility was also down on Wednesday, but only 3/4%, and with enough time to be held in check while we endure the current upheaval. Wheat futures gave back 3/4 of Tuesday's up move, with really no clear indication that we've in fact failed. We held up enough to keep the bears honest. There was also a big buy order in the Dec. 650 calls (RJ O'Brien bought 1000 for 14 1/4 1/2). But puts remain the customer's best way to seize on a flush out, and traders at least got their opportunity on Wednesday to buy some of the Dec. 610 puts from paper. Timing has never been more elusive that it is right now. The right thing at the wrong time ends up simply being wrong when there's so little room for error. The next two weeks aren't going to be easy to predict. The large sell order in the Dec. 700 calls from Tuesday's action could creep back into the picture in a big way if this wheat market can scare up a rally in the next couple days."
At the close:
The Dec. corn futures settled 4 1/2 cents lower at $6.56 per bushel. The Jan. soybean contract closed 19 1/2 cents lower at $11.85 1/2. The Dec. wheat futures ended 14 cents lower at $6.43. The Dec. soymeal futures closed $4.50 per short ton lower at $303.10. The Dec. soyoil futures settled $0.42 lower at $51.43.
In the outside markets, the NYMEX crude oil is $01.38 per barrel lower, the dollar is higher and the Dow Jones Industrials are down 353 points.
One analyst says, "The USDA Crop Report failed to fulfill hyper bullish expectations. With the Dow plunging lower early afternoon, it added to late selling pressure."
The Dec. corn futures are trading 1 1/2 cents higher at $6.62 per bushel. The Jan. soybean contract is trading 8 cents lower at $11.97. The Dec. wheat futures are trading 7 cents lower at $6.50. The Dec. soymeal futures are trading $1.30 per short ton lower at $306.30. The Dec. soyoil futures are trading $0.42 lower at $51.43.
In the outside markets, the NYMEX crude oil is $0.66 per barrel higher, the dollar is higher and the Dow Jones Industrials are down 224 points.
One floor trader says that the outside markets have loosened their grip slightly on the farm markets. "At the open, we saw all the grains sharply lower due to macro events, specifically fear and uncertainty regarding the situation in Italy. So today's trade started off as a "risk off " trade for equities and commodities as external markets took control," Longo says.
"Currently, the equity markets have bounced off their lows," she says. Corn and crude oil have rebounded into positive territory but beans and wheat remain negative."
At the open:
The Dec. corn futures opened 10 cents lower. The Jan. soybean contract opened 19 1/4 cents lower at $11.86 3/4. The Dec. wheat futures opened 18 cents lower at $6.39. The Dec. soymeal futures opened $3.70 per short ton lower at $303.80. The Dec. soyoil futures opened $0.70 lower at $51.15.
In the outside markets, the NYMEX crude oil is $1.88 per barrel lower, the dollar is higher and the Dow Jones Industrials are down 291 points.
The OTC markets are still trading negatively. One floor trader just told me that he can't find anything bullish in this report, but he can't find anything bearish. "The problem is the big bulls didn't get what they wanted. The bears will use that as ammunition against them. Ultimately, when you don't meet expectations, that's bearish."
That same trader sees lower markets today.
The over-the-counter market, trading right now, ahead of the open, has corn unchanged. The floor traders tell me the report provided a smaller yield and crop size number, but it might not be enough fire power to get this market to go higher. In addition, the outside markets are applying a lot of pressure this morning. We'll see. What do you all think of the numbers?
Corn=12.31 billion bushels, compared to the average analysts estimate of 12.402 billion bushels and the government's October estimate of 12.433 billion.
Soybeans=3.046 billion bushels, compared to the average trade estimate of 3.059 billion bushels and the USDA's previous estimate of 3.060 billion bushels.
Corn= 146.7 bushels per acre, vs. the average trade estimate of 147.9 bu./acre and the USDA's October estimate of 148.1 bu./acre.
Soybeans=41.3 bushels per acre, compared to the average trade estimate of 41.5 bu./acre and the USDA's October estimate of 41.5.
Floor traders say the USDA Report is slightly friendly for corn.
Corn=5-10 cents higher.
Soybeans=2-4 cents higher.
A floor trader says, "The big bulls didn't get what they were looking for."
One analyst says, "I think the report is negative for beans, but neutral to positive for wheat and corn. That is reports only. Exports are being treated in a conservative manner, very fair considering the sales pace. But cuts in corn and wheat production seem price positive and less ending stocks for both are a little price positive as well. Dollar is sharply higher and outside markets are not strong, so we will see how the calls hold up. Beans -10, corn and wheat steady/mixed for me."
Yet another analyst says, "the feed use for corn fell 100 million bushels which nearly offset the entire yield decline. This is a ? mark in my opinion because profitability is at such high levels for livestock feeders, but it did prevent a big shock to the ending stocks for corn. I think traders will see through this.
Beans they cut exports by 50 million bushels which was widely expected, I was expecting them to bring the yield down further, but carryout stays under 200 million so nothing too terrible.
Wheat was down 9 million so nothing too shocking there.
Friendly corn, neutral wheat and slightly negative beans.
This is just the report. Everything else in the outside markets is negative so this will take steam out of any friendliness of the report."
--Japan is seeking 290,000 metric tons of wheat.
--EU wheat market is ticking up a bit, ahead of the USDA Report. Which reminds me. Is anybody trading the USDA number, right at 7:30am on London's Exchange? You don't have to wait until 9:30am to trade the number.
Early calls: Subject to this morning's USDA Crop Production and Supply/Demand Reports at 7:30am. We will have the numbers and reaction for you right here. The overnight markets have corn essentially unchanged, soybeans 9 cents lower, and wheat 8 cents lower.
Overnight grain, soybean markets=Trading mostly lower.
Crude Oil=$1.27 lower.
Wall Street=Seen trading lower on Italy's uncertainty.
World Markets=Asia/Pacific stocks are higher, while Europe's stocks are lower.
Still harvesting? Overnight, nearly 7-inches of snow fell in Winterest, Iowa, about 30 miles south of Des Moines. There are still crops in some fields in that area. Heavy snow is knocking down tree limbs and power lines. For some, this has been a wierd harvest season.
Big problems overseas, with Italy's Prime Minister resigning. At first, the market took the resignation as a positive sign. But, the fear of who might lead that country out of its debt crisis has set in. Europe's stocks are tanking and the U.S. Stock market is expected to open lower at 8:30am.
More in a minute,
11-09-2011 07:04 AM
Good morning, Mike and all! After this morning's reports, we'll have Greg Thiessen, director of the Iowa state office for NASS, stop by our office around mid-morning. We'll be chatting the numbers and how the process panned out. If you have any questions or comments for Greg, post them here before around 10:00 this morning and we'll make them part of the conversation.
Anybody else have to get the snow shovel out this morning? A little early in the year for this, isn't it?!
Agriculture.com Multimedia Editor
11-09-2011 07:13 AM - edited 11-09-2011 07:14 AM
Looks like today's USDA numbers are getting quite an audience in overseas grain markets: USDA May Jolt Wary Market.
From that story: "There is more grain in the world than what we thought 45 to 60 days, ago but inventories of wheat, corn and soybeans are still tight," Kansas State University Senior Agricultural Economist Jay O'Neil said by e-mail.
Sounds like these stocks numbers are the ones to watch this morning, especially for corn.
Agriculture.com Multimedia Editor
11-09-2011 07:17 AM
I live in the 'snowbelt' in Ontario and the temperature here this morning is 13 degrees C so obviously no snow, hardly need a jacket.
But I suppose you are sending that 'stuff' up to us.
Wisdom is knowing not to put it in a fruit salad.
11-09-2011 07:20 AM
Ouch. We're getting snow and Canuck isn't?! That's a bad sign...ha!
So, which of these USDA numbers are you watching the closest this morning?
Agriculture.com Multimedia Editor
11-09-2011 07:43 AM
Despite lowered projected yields and tighter expected ending stocks for U.S. corn, USDA expects the per-bushel price range to stay put from last month's estimate.
Wednesday's World Supply/Demand Estimates (WASDE) report shows corn production is forecast 123 million bushels lower than last month's estimate, reflecting a 1.4-bushel-per-acre decline from October. That makes this year's projected yield -- 146.7 bu/acre -- the lowest since 2003/2004.
"Projected U.S. ending stocks are lowered 23 million bushels," according to Wednesday's report. "The season-average farm price is unchanged at $6.20 to $7.20 per bushel."
In Wednesday's Crop Production report, USDA shows corn and soybean production just slightly lower than last month's guess. Corn's forecast at 12.3 billion bushels, while soybeans are seen at 3.05 billion bushels. That soybean number is 9% lower than a year ago, and if realized, the corn number will net the nation its smallest corn crop size since the 2003 crop year.
Agriculture.com Multimedia Editor
11-09-2011 07:50 AM
One analyst says, "the feed use for corn fell 100 million bushels which nearly offset the entire yield decline. This is a ? mark in my opinion because profitability is at such high levels for livestock feeders, but it did prevent a big shock to the ending stocks for corn.
Jeez that guy has been smokin the good stuff!
Mike I just got back froma trip back to Mi. I could not believe how many guys had quit milking cows in my old neighbor hood. One 2000 sow hog farm had quit and he was about the last one in the area.
There has been huge liquidation in the cow herd and those cows are not going to produce again EVER!
I still think the feed usage number has been to high for too long.
You need to get that guy some help!
BTW thanks for the reporting.
11-09-2011 08:49 AM
I find it interesting that the EU wheat market plunged after the USDA's numbers were announced.
Here's a look at what the USDA did to world wheat numbers:
Raised 2011-12 world wheat production from 681.20 million metric tons to 683.30 mmt.
Russia's wheat output was left alone at 56.0 mmt, which is bearish.
Kazakhstan wheat output was estimated at 21.0 mmt, compared to 19.0 mmt a month ago.
Russian wheat exports were raised by 1 million tons to 19 million tons.