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Be careful interpreting USDA numbers

11/08/2012 @ 3:36pm

The USDA reports will be released at 7:30 a.m. CST Friday morning and, once again, the markets will trade through the reports. It will be the last crop estimate of 2012. The market will have to be content with these crop sizes until the final numbers in January 2013. 

 

What is expected? A little less corn and a lot more beans. Continuing the theme of higher yields from the late beans in the eastern Corn Belt, the market is expecting another increase in bean yields. 

 

There may also be a psychological issue for the soybean market to confront tomorrow morning. With higher yields, the average trade guess is 2.89 billion bushels -- up 31 million bushels from October, according to one news wire survey. The largest estimate is 2.96 billion bushels. That’s 100 million bushels more than the USDA’s last number. 

 

But what number is the market really trading? The price action over the past few days suggests the market is afraid of a HUGE number. If traders only have the average guess number in their minds, they may be baffled by the price action tomorrow. Keep the range of possibilities in mind, especially as Friday’s trade unfolds. 

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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.   

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