Outlook from the CBOT Floor for April 9, 2012
Matt Pierce 04/09/2012 @ 9:29am
Thursday saw another round of excited buying in corn and beans with wheat actually not losing groundOld/New bean spreads exploded, corn spreads folded and front end meal spreads bent bearishIt was another messy session with a strong upside bias noted.
The bean strength comes from Chinese markets more than fresh demandExport sales were solid but so is the planting start here in the USThe delta is basically done, IL corn could be 30% this week and MO is looking unstoppable. Dryness in the northern plains is the only new crop issue of note.
What is more important right now is tomorrow’s WASDE reportTwo key factors to look atold crop stocks in corn and beans and South American productionOld crop stocks are expected to drop but traders expected that last year as well.
Corn old crop stocks average guess 721 millionMarch estimate 801 million
Bean old crop stocks average guess 246 millionMarch estimate 275 million
Wheat is expected to drop but only marginally on higher exportsThe average guess is 792 million versus 825 in March.
World ending stocks are expected lower across the board with wheat down 1 MMT, with corn and beans down 2 MMTThe drop in corn and beans are due to expected drops in Argentine corn and Argentine beans and Brazilian beans
This report has the opportunity to set the market afire or really squash bull spread hopesIf the USDA is conservative and leaves old crop corn stocks unchanged old new spreads will likely collapse as length looks to exitThe USDA is not here to scare anyone and spreads are already showing weaknessCN-Z closed at 102 on Friday showing weakness in spite of old new bean spread strengthThis is obviously not an across the board money moveInstead this may be a profit taking moveHard to argue with old crop bean stocks lower right now due to Chinese demand but this would be an aggressive move with only the trend exploding, not the real numbersWe are at or just above last year’s bean export paceIt would not be in the best interests of the USDA to lower stocks here allowing potential for old crop inversions to blow up.
The reports will set the obvious tone for the rest of the week along with weakening macro data. Overnight China stated their CPI jumped to 3.2% from the Feb lowFood inflation was calculated at 7.5% with pork and vegetable oil to blame. As for US data, wait until the end of the week for PPI on Thursday and CPI on FridayOutside WASDE traders get the second look at crop progress today with corn planting and winter wheat conditions of biggest note. Look for corn plantings to impress again.
Get more from Matt Pierce at GrainAnalyst.com