08-14-2013 06:32 AM
Feels like I am going to a football game this morning. Very Autumnal around here. I guess that is what has a lot of guys nervous about total production at the end of the year.
Corn seems to have totally debunked the USDA and gave back all of the report's gains. At some points we had 5 cent swooshes where there were no bids. A definite consequence of electronic trading but it gave the feeling of 'no bids below'. The last 10 minutes of the day yesterday was pretty hairy.
This morning we have beans down 12, corn up 1 and wheat down 2. The options trade is schizophrenic with no real direction over the last few days as investors digest the report and then ingest their own opinions.
Reports of a recovery taking place this morning in Europe (I don't believe it) have the talking heads all a twitter. It's not good enough to get stocks higher on the day as they are slightly lower. The 10 year is basically unchanged at 2.70%.
Oil is backing off .73 cents to $106.10 and gold is laying there, up $4.90 to $1326.56.
More economic news this morning puts the U.S. in the spotlight. It better be good.
08-14-2013 06:40 AM
I read this morning that the traders are questioning of the way USDA formulated their latest yield prediction and have decided they made a mistake in lowering the yield. There is renewed hope for a large crop insurance payment afterall.
There had better be a significant rally in the markets in February for insurance reasons......or else next year's corn acres are going to be much lower. Low prices again will cure low prices.
08-14-2013 07:18 AM
Talk on the floor is that they used a 5 year average which brought the weights down significantly. Apparently, if they throw out a light/dryish 2012 and 2011 the weights would have been heavier. Again, this is the talk, but if they don't use the light/dry years the traders think that you would ADD 2 or 3 bushels to the USDA, not subtract 2.
Just the messenger...
08-14-2013 07:23 AM
It's strange that the USDA would not throw out the bad year on this, when they threw out last year's yield when guessing the trendline yield for this year. I guess they are making up the rules as they go.
08-14-2013 08:22 AM
They did use the ear weight for 2012 in the average. They got to an ear weight of .317 by using the average of the last five years. The market has discounted the yield report from USDA because the trade doesn't believe the weather of 2013 warrants including the extreme years of 2011 and 2012 in the ear weight averages.
08-14-2013 08:32 AM - edited 08-14-2013 08:34 AM
Embarrass MN. had 31 degrees. I know it's a swamp way up Nort, just saying it's kinda chilly.
I read the USDA had to do what they did on year weights because they had a hard time finding mature enough ears to weigh.
08-14-2013 12:53 PM
I also read that this is the first report of the year where they actually check fields and talk to farmers. The earlier reports are apparently derived from statistical probabilities. I'm guessing looking at real corn fields and talking to real farmers probaly caused them to get confused, hence the lack of bearish numbers.