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USDA report overshadowed?

Agriculture.com Staff 02/06/2016 @ 1:24am

CHICAGO, Illinois(Agricuture Online)--Even before the USDA's September Crop Production report was released, many market participants were saying the October report will carry more of a market impact.

However, once the financial crisis hit, CBOT floor traders began to talk solely about the equity markets affecting grain prices, not fundamentals.

On Friday, the USDA will release its October Crop Production report at 7:30am CST. The hype for this once-believed very important report has been overshadowed.

This week, plenty of focus continues to be on the financial crisis and talk of how the equity markets have been driving the grain markets.

It's true, following the recent financial crisis, the days and weeks have brought gaping losses in the corn and soybean markets, $1.50 in corn, and $3.00 in soybeans.

Jim Bower, President of Bower Trading, Inc. says this Friday's USDA Crop Production report shouldn't be taken lightly.

"I think the market is going to put more weight on the corn production and soybean yield numbers than most think," Bower says. The backdrop ahead of this report is crisis oriented, but the crisis increases the interest in the USDA's ethanol usage number in Friday's report. As crude oil prices drop, that makes it harder for corn prices to climb."

There will be a lot of interest to see if the USDA cuts the 2008/09 Chinese import numbers, Bower says. "With the Chinese economy slowing, are we going to readjust that format," Bower says. Also, with South American producers facing lending problems and high inputs, what does the USDA do with their production numbers?"

John Roach, Roach Ag Marketing, Ltd, focused his daily newsletter on the financial crisis before asking a simple question about the USDA report.

"The net of the situation is that every country in the world took a shellacking in the past week and are finally taking major steps to stabilize financial markets. Maybe now we can go back to trading corn, bean, and wheat fundamentals which will be re-estimated by the USDA tomorrow (Friday)."

Vic Lespinasse, grainanalyst.com, says CBOT floor traders are keeping one eye on the USDA report and one eye on the equity markets.

"You have to assume the report is going to be the most important thing to the grain markets. But, if the credit markets are having a meltdown then the USDA report has less of a punch. The thing is you can't count out a financial market meltdown."

Meanwhile, Lespinasse says if there is a surprise in tomorrow's USDA report, traders think it will be a lower than expected bean production number and/or a higher than expected corn production estimate.

For Friday's report, the average trade estimates for U.S. corn production are set at 12.076 billion bushels vs. USDA's September estimate of 12.072 billion. The trade is estimating a corn yield of 152.3 bushels per acre, unchanged from September's estimate.

The trade's average U.S. soybean production estimate is set at 2.920 billion bushels, vs. 2.934 billion from September's report. On yield, the trade expects a 39.3, slightly lower than USDA's September estimate of 40.0 bushels per acre.

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