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USDA data seen as bearish for grain markets

Agriculture.com Staff 10/09/2009 @ 6:13am

CHICAGO, Illinois (Agriculture Online)--The USDA's October Crop Production report is seen as negative for corn and wheat, neutral-to-bearish for soybeans Friday.

"There's nothing friendly in this report," one floor trader says.

Matt Pierce, CBOT floor trader with Futures International LLC, says the report is surely bearish for the corn market. "But, the report isn't exciting by any stretch, due to the amount of rains expected over the next seven days."

The Early calls for Friday's trading is 10-15 cents lower for corn, and 5-7 cents lower for soybeans.

For U.S. corn production, USDA estimates the crop at 13.018 billion bushels, above the average trade estimate of 12.993 billion bushels and above the USDA September estimate of 12.955 billion bushels.

USDA estimated the 2009 U.S. corn yield at 164.2 above the average analysts estimate of 162.7 bushels per acre and above the USDA's previous estimate of 161.9.

For soybeans, the USDA estimated the U.S. 2009 production at 3.250 billion bushels, slightly below the average trade estimate of 3.291 billion bushels, and above the USDA's previous estimate of 3.245 billion.

In its report, the USDA estimated the U.S. 2009 soybean yield at 42.4 bushels per acre, slightly below the average trade estimate of 42.9 bushels per acre and above the USDA's previous estimate of 42.3.

USDA pegged the U.S. 2009-10 corn carryout at 1.672 billion bushels compared to the trade estimate of 1.675 billion bushels, and its September estimate of 1.635 billion.

For soybeans, USDA estimated 2009-10 carryout at 230 million bushels vs. the average trade estimate of 257 million bushels and the previous estimate of 220 million bushels.

"The report is surprisingly bullish for domestic soybeans but international stocks up 4 million metric tons is bearish," Pierce says.

For wheat, the USDA estimated U.S. 2009-10 carryout at 864 million bushels, sharply higher vs. the trade estimate of 798 million. "For the wheat market, the report is slightly bearish but due to wheat corn spreads I cannot support a drastically lower bias. We should see volatility down big with spreads playing out a majority of the information," Pierce says.

Jason Ward, Northstar Commodity Investment Services, says the market will find very little friendly news in this report.

"The corn yield estimate is big, eight of the top 10 states showed increases in yield from September report, Nebraska up 9 bushels from September, wow!"

To offset a big yield, the USDA lowered harvested corn acres by 700,000 acres. "This is evidence of a wet planting season that traders thought would show up in June report," Ward says.

USDA raised corn feed usage by 50 million bushels but lowered exports by 50 million bushels. "All in all, corn yield was bearish, harvested acres was friendly, now it is up to the trade to decide whether they believe the yields. I personally think Iowa is too high on yield and I’ll take the under on Nebraska as well. The other 2 states that I think are overstated are SD and ND. The percent of their crop that is mature is too low to see higher yields there, I think the early end to their growing season hurts them enough to prevent their yields from increasing," he says.

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