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Waiting for the USDA

Agriculture.com Staff 09/10/2009 @ 2:22pm

It is difficult in some ways to write comments the day before the USDA crop reports. Whatever is written has a good chance of being meaningless 30 seconds after the reports are released.

There are some themes, however, that should be mentioned before the reports. First, pre-report estimates are generally larger than the August report. Many analysts have record yields penciled in for corn. Second, in the back of analysts' minds is the thought that the USDA will still not give updated acreage numbers until October. This could cause unexpected swings in the future. Finally, not everyone agrees with high yields. Lanworth released a crop estimate publicly for the first time and has yields close to last year and reduced acres for corn and beans, as well. So their crop numbers are small.

Knowing the general idea that market participants are anticipating larger numbers means the market will not be surprised with larger numbers. It would probably take a large, outlying number to surprise the market. Conversely, the market would view smaller or stable numbers as a bullish surprise.

The fact there is disagreement in the pre-report estimates is probably helpful to the market. Seeds of doubt have led to some short-covering in the markets, especially corn. Today corn futures contracts closed up over five cents as many lightened up positions before the report. This may help lessen the volatility tomorrow as the market digests numbers.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

It is difficult in some ways to write comments the day before the USDA crop reports. Whatever is written has a good chance of being meaningless 30 seconds after the reports are released.

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