Does the corn market's bullish USDA news have traders thinking twice?

Does the corn market's bullish USDA news have traders thinking twice?

Corn traders seem somewhat confused by the USDA's move to lower, rather than raise, their current yield estimate (ear counts lower and ear weights less than record). As for now, the USDA expects yields to average 173.4 bushels per acre, down 0.8 bushel from their previous forecast. Many seasoned traders will tell you this was clearly unexpected and somewhat bullish news. They will also tell you when a market fails to rally (as it did yesterday) on a bullish headline, it's a market that may be headed for more downhill price action. I tend to concur. I should note the estimate for global corn inventories actually moved higher from 190.58 million tons to 191.5 million tons.  From a "technical" perspective nearby support remains at $3.65 vs. the DEC14 contract and then again at the $3.50 level.  Many technical analyst believe a close below the later would leave the market vulnerable to re-testing previous lows back below $3.20. The key will obviously be the South American weather.  If we don't receive any type of bullish headlines from South America I suspect we continue to drift a bit lower. On the flip side any type of major weather hiccup will make storing the bushels worth the wait.     For those who still have large quantities "unpriced," make certain you keep one finger on the trigger, as "weather" markets can be extremely tough to time.  Also keep a close eye on your basis, I'm thinking as we head into year end with not many US farmers in a hurry to sell or incur the 2014 tax burden, the basis may continue to strengthen in many locations as the farmers lock away the corn.  Remain patent...  

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A Look Inside the Numbers: The US corn harvest is now reported at 80% complete and back on pace with the 5-year average.  Some of the bulls are talking more about "weather" concerns, primarily those concerns that pertain to the 1.0 billion plus bushels of corn that still remain out in the fields of: IA (approximately 435 million bushels still in the fields); MN (about 125 million); WI (about 245 million); and the Dakota's (about 225 million). The bears on the other hand seem content adding little if any "risk-premium" to the remaining harvest concerns, especially now that we are no longer "behind."  From a "demand" perspective there was very little change. The corn used for Ethanol was raised by 25 million bushels, while corn used in other Food, Seed and Industrial was lowered by 20 million bushels. Exports remain debatable, as most inside the trade believe they are a bit too optimistic, while the USDA has decided to leave them "unchanged." As you can see from the graphic below the largest changes came from MN & OK where both states were lowered by -5.0 bushels per acre; KS was lowered by -3.0 bushels per acre; IA was lowered by -2.0 bushels per acre; MI & OH were each lowered by -1 bushel per acre.   CLICK HERE for my daily report...

TAGS: Corn
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