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Big reports, big numbers

11/01/2013 @ 9:44am

The markets continue to digest the big chunks of post government shutdown news.  

Supply will be key on Friday, when two private estimates are released--one during market hours and one after the close.  The USDA report will be the following Friday. 

Thinking ahead, there very well could be farmers, analysts or traders who are not happy with the November USDA reports.  In that case, the January reports will have the final say.  If crop sizes are a concern, the stocks report that will provide data to fine tune the supply situation. 

Discuss the corn, soybean and wheat markets in Marketing Talk. 

Back to the present, the soybean market in general has seen very robust demand (think China) in the face of tight supplies.  It seems that a larger crop size will be offset by larger demand.  The market is anticipating larger and larger supplies of soybeans in the future---larger South American crops and a larger US crop next fall, given several forecasts for increased bean acres. 

On Thursday, a three week chunk of export sales was released.  The guesstimates were big and the actual sales were even bigger.

Bean sales were 4.742 million metric tons (mmt) and corn sales were 4.555 mmt.  That’s a phenomenal 174 million bushels of beans sold and 179 million bushels of corn.   Wheat and soymeal sales were good sized, but still disappointing. 

Even large sales were unable to stop the slow decline in corn prices.  Demand might be just what the market needs, but it is still overwhelmed by the big supply story.  

The bright spot in all of this has been very strong basis levels.  During the first days of harvest, it appeared the market simply needed to re-fill the pipeline that had been emptied of $7.00 corn.  Continued strong demand from ethanol plants (right now, grinding corn for ethanol is very profitable) put market participants on notice that cash corn needs to flow to end users, rather than bins.  Farmers have not sold much of their 2013 crops and the worry is that they will sit on corn in bins or commercial storage until 2014.  If more corn flows to market in 2014, look for basis levels to weaken. 

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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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