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Traders question impact of biggest USDA report

Agriculture.com Staff 02/12/2016 @ 2:32pm

CHICAGO, Illinois (Agriculture Online)--Traders on the floor of the Chicago Board of Trade have a wait-and-see attitude towards the USDA reports on Friday.

USDA is scheduled to release five key reports at 7:30 am this Friday, including Winter Wheat Seedings, Quarterly Grain Stocks, Annual Crop Production, and finally Domestic and World Grain Stocks.

Traders will closely watch the USDA estimates for the 2007 corn and soybean crop sizes. In addition, the trade is interested in the USDA's estimate for U.S. winter wheat seedings.

The average analysts estimate for 2008 winter wheat seedings is 48.657 million vs. 44.987 a year ago.

Traditionally, the January 11 USDA reports are seen as the biggest of the year. Because the reports show the final estimate of the most recent crops harvested, the data influences market direction.

However, 2008 CBOT prices have started out with a bang. Already, CBOT soybeans have hit an all-time high of $13 per bushel. The July CBOT corn contract set a high this week. Plus, strong export business and weather issues in South America are underpinning the markets. Hedge funds rebalancing their portfolios is creating trade volume and volatility.

As a result, even a bullish USDA report on Friday could be overshadowed by the current market fundamentals, traders say.

"The question is what impact bullish crop data will have," one floor trader says. "It's widely assumed the crop figures will be lowered. But, how much is already built in?"

Joe Bedore, FC Stone's CBOT floor manager says most traders are expecting a surprise in this report.

"From what category that surprise comes from is hard to pick," Bedore says. "I think most are interested in wheat seedings, because that tells us how much double-crop soybeans we will have. If there isn't a radical change in corn and soybean production, the wheat seedings will get the most attention."

Bedore adds, "Perhaps the USDA will lower corn use for ethanol, or surprise us with a big change in carryover numbers."

Matthew Pierce, Futures International LLC, says major increases in winter wheat acreage is already factored into the market.

"That's why you see the big price spread between old crop and new crop right now. After the report, I don't expect any surprise in wheat," Pierce says.

For corn and soybeans, the report could be interesting as to the changes in acreage, Pierce says.

"Some people have 2008 soybean acres increasing by 7.0 million, others only have them up 4.0 million. There's a big degree of variability there," Pierce says.

The general consideration for corn production is a 6.0 million decrease.

"This is why the funds are not moving into the old crop or even into July. They are moving into the new-crop month contracts of Nov '08 beans and Dec '08 corn."

On the world balance sheet, traders will be watching the USDA's downward revisions of Argentina's corn and soybean production, Brazilian increases for soybeans, and overall world wheat decreases in ending stocks.

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