Corn trade continues to question latest USDA numbers, especially "feed/residual." Just looking back through the past several years, this same "fed/residual" number has been heavily debated. In the publics eye it has notoriously been thought of as a place where the USDA can hide and find bushels in order to make adjustments without the entire trade crying foul. This time around some are wondering if last years crop should have in fact been lower and the USDA is playing catchup? Some are wondering since supplies were so low for many end-users following the short crop year that the USDA is getting supplies that are simply being used to re-fill pipelines confused with corn that has actually already been fed? Many believe this now sets the stage for the USDA to find additional corn supplies later down the road, which would obviously be bearish the trade. Other are saying the numbers seem fairly accurate as many livestock owners have made massive dietary shifts back to corn the past several months on cheaper corn prices, especially the larger hog operations. Regardless of your position on this debate, the trade seems to be somewhat discounting the validity of the USDA's latest estimates. Lets also keep in mind, regardless, Dec 1 stocks are still up almost 30% compared to last year.
Why I Don't See The Report As Bullish: Investment banks may have improved outlooks, but in my opinion there are a few more wrinkles to iron out before one becomes bullish corn. Remember its all about money-flow and who is controlling the game. Unless they can find something "real" in the long run to hang on to, most will only be looking to take the recent rallies as opportunities to ride corn back down to the sub-$4 levels they have been eagerly anticipating. The questions are, how will the funds respond to the shift in data, and who is the buyer on a bust? Despite a number of obvious S&D reasons for not being bullish, if NEW money-flow or NEW speculative interest doesn't jump on the long-side of this market then prices will NOT move higher for any significant period of time. Remember, it takes sustained buying interest and a lot more people jumping on the bullish bandwagon each day to push prices up the hill for an extended period of time. Sure, a short-covering rally could push us higher nearby. Sure, there could be some short-term swing traders looking to play the game from the long side of the fence for a brief pop to the upside. But I am sorry, I just don't see the overall mentality of the big specs and big position players changing on the latest USDA data. Throw a major Chinese or US summer time weather story in the mix, and yes, I am almost certain my opinion would be different. The problem right now is, there just aren't any additional headlines to go along with the USDA numbers. In return I believe the report is simply just a little less bearish than before, but by no means should it be considered bullish as of yet. Click here for my daily report...