Soybean trade braces for uptrend after USDA releases production, WASDE numbers
Wednesday's CBOT grain trade started out lower across the board after USDA released monthly crop production and stocks numbers.
The data indicate tight stocks will eventually send the soybean trade higher. But, the common thought that the corn market might drag soybeans through the mud a little between now and the start of the 2009-10 marketing year seemed to be coming true in early trading Wednesday.
"The bean crop estimate would make it the largest U.S. bean crop ever while the corn number would make it the second largest ever," says Grainanalyst.com floor trader and market analyst Vic Lespinasse. "There was very little acreage switching between the corn and beans despite trade expectations of up to 1 million acres less corn and a similar increase in beans."
Even with these big crop numbers, demand will stay tight for soybeans while it's continuing to loosen for corn, two trends that will send those markets in opposite directions. That's the main takeaway analysts say they got from Wednesday's USDA crop production and stocks numbers. While most agree that the data will end up bearish corn and wheat and bullish soybeans, there are a few holes analysts and farmers say they see in the USDA figures that are creating some skepticism. And at least for the corn trade, that's not good news for prices.
"It looks suspicious that USDA has raised corn usage by 350 million bushels from last month. There's no reason to believe feed usage will go up next year," says market analyst Rich Feltes of MF Global. "The market will be skeptical about the corn usage and supply numbers, and hence I think corn is easily going to put in new lows, and unless we run into some frost threat to prematurely end the growing season, the path is pretty clear here moving forward."
"The question to ask yourself is if we use 150 million bushels more for ethanol which also leaves 50 million bushels for DDGs, then also raise feed 100 million bushels, who is going to eat all that feed with almost every livestock guy saying that herd reductions will happen," says Agriculture Online Marketing Talk member northcorn.
Analysts are in general agreement that corn prices will test new lows after these numbers, while soybeans will trade at $10+ levels for some time. It's likely going to generally stay this way unless an early frost threat enters the equation. Feltes says there are a lot of corn acres in the Dakotas, Wisconsin and Michigan that are well behind the normal developmental pace, and those acres are the most at risk for frost.
"Those crops are late. We still have a percentage of corn in those states not tasseled yet," Feltes says. "Those acres are still at risk and vulnerable. There's at least twice as much corn vulnerable to early frost in those states as normal. For soybeans in the Dakotas, I believe there are 250 million bushels vulnerable up there. That's part of why this risk premium in the soybean market will carry over into the fall. Frost will be more supportive for beans than corn."