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Bullish USDA corn report, traders say

The USDA released bullish data Thursday, pushing down U.S. corn supplies.

Early calls for the commodities are called 15-20 cents higher on corn, soybeans are seen opening mixed-to-lower, and 3-5 cents higher for wheat, CME Group floor traders say.

"It looks like corn is the only one with the problem in this report," one CME Group floor trader says. "Corn pushes up everything else today."

Old-Crop Ending Stocks

In its June Supply/Demand and World Production Reports, the USDA estimated the  U.S. 2010-2011 corn ending stocks at 730 million bushels, compared to the average analysts' estimate of 706 million bushels and the USDa's previous estimate of 730 million.

For soybeans, the USDA pegged the U.S. 2010-2011 ending stocks at 180 million bushels vs. the average analysts' estimate of 176 and the USDA's May estimate of 176 million bushels.

U.S. old-crop wheat ending stocks were estimated at 809 million bushels, compared to the average analysts' estimate of 842 million and the USDA's May estimate of 839 million bushels.

New-Crop Ending Stocks

For 2011-2012, the USDA estimates U.S. corn ending stocks at 695 million bushels, compared to the average analysts' estimate of 771 million and the USDA's May estimate of 900 million bushels. For soybeans, the USDA estimates 2011-2012 ending stocks at 190 million bushels vs. the trade's estimate of 170 million bushels and the government's previous estimate of 160 million bushels. USDA estimates the U.S. new-crop wheat ending stocks at 687 million bushels, compared to the average trade's estimate of 659 million and the USDA's May estimate of 702 million bushels.

U.S. Wheat Production

In its June Report, the USDA estimates the U.S. 2011 Hard Red Winter wheat production at 776 million bushels vs. the average trade estimate of 74 million and the USDA's May estimate of 762 million bushels.

Trader Reactions

Jason Ward, Northstar Commodity Investment Co., says the report is very bullish for the corn market.

"The lower new-crop corn ending stocks at 695 million bushels takes into account lost acreage due to flooding. They (USDA) cut the percent harvested, no changes to usage anywhere," Ward says.
Old crop corn was left unchanged, and viewed as neutral, Ward says. "So, it should be a bear spread day where Dec 11 gains on July 11 corn."
The bean numbers were slightly negative across the sheet, Ward says. "With a 10 million bushel increase in old-crop ending stocks, that carried over to new," Ward says.
Both old crop and new crop wheat were slightly tighter than last month. "So, a friendly view there. Also look at the extreme strength we are seeing in European wheat this morning," Ward says.
Jack Scoville, PRICE Futures Group analyst, says the opening calls are uncertain. "Opening calls are higher, but I wonder a bit why.  I thought the soy was not all that bullish at all, especially in new crop and I was calling that lower," Scoville says.  Wheat was I thought neutral for the US, and the corn was positive."  

Terry Roggensack, The Hightower Report co-president, says the USDA report this morning was considered bullish for corn with soybeans and wheat prices subject to be pulled up. "Wheat and soybean numbers carried a bearish tilt but the markets will likely be dragged higher by corn."

For the 2011/12 season, ending stocks are pegged at just 695 million bushels as compared with 900 million bushels last month and trade expectations near 770 million. "This is a 5.2% stocks/usage ratio which would be the second tightest on record," Roggensack says. 

USDA left the 2011 U.S. corn yield estimate unchanged at 158.7 bu/acre, but planted area was revised down by 1.5 million to 90.7 million acres. Also, U.S. corn harvested acres were dropped by 1.9 million to 83.2 million. 

As a result, corn production is expected to come in at 13.2 billion bushels which is down 305 million bushels from last month and 55 million below expected usage. 

Corn Usage

Feed usage for the new crop season was revised down by 100 million bushels. World ending stocks for the 2011/12 season came in at just 111.89 million tonnes, as compared with 129.14 million tonnes last month and 117.44 million this year. "This is a 12.8% world stocks/usage ratio which is the third tightest on record and the tightest since 1973," Roggensack says.    

 

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