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Calm before USDA storm?

06/27/2013 @ 1:53pm

Friday's USDA Reports have the potential to provide big price swings with even the smallest of changes to the corn and soybean supply/demand data.

The USDA will release its June Acreage and Quarterly Grain Stocks Report Friday at 11:00 a.m. CT.

The market really wants to know how many U.S. corn acres will be cut due to the extremely wet planting season and how many additional soybean acres there will be in 2013.

Normally, this June 28 report would be considered the final USDA acreage estimate. However, the USDA has extended the period to report acres seeded until July 15. 

Tim Hannagan, Walsh Trading grain analyst, says Friday's estimate will still be considered the final estimate.

"The late reporting date will give us the final numbers late July when the trade won’t be as concerned. At that time, all attention will be on corn yields and weather. So, this report will be traded as if it will be the final numbers," Hannagan says. 

The prereport trade estimates have an average planting estimate for corn at 95.3 million acres vs. 97.2 on the USDA's March update. There is a trade range from 94.2 to 97.2. 

"Anything close to the low estimate and limit up trade is certain. The trade collectively believes about 2 million acres will go unplanted from original projections," Hannagan says. 

U.S. soybean acres are estimated at 77.8 million acres vs. 77.1 in March. Delayed planting may force the USDA to make little changes to this number Friday.

QUARTERLY STOCKS REPORT

Regarding stocks, the USDA has its work cut out for it there, too. Already, the U.S. is facing historically tight old-crop corn and soybean supplies. With no signs of rationing, other than weak corn exports, the USDA has to find that balance of not printing too low a number of grain stocks that would shock the market, yet low enough to remain credible in the eyes of the U.S. farmer and trade that know supplies remain very tight.

"The wild card is the second report, the Quarterly Stocks on-hand as of June 1. The last report (in March) pushed corn down the 49-cent limit and further the next day, as the USDA claimed to have found 400 million bushels they didn’t know we had," Hannagan says. 

Trade consensus indicates that the quarterly stocks report, again, could dominate trade. 

Prereport estimates look for 2.862 billion corn bushels on-hand, as of June 1, vs. 3.150 billion a year ago. "It will take 200 million bushels over the average guess or under to have a sharp reaction," Hannagan says.

For soybeans, U.S. quarterly stocks are estimated at 447 million bushels vs. 667 million a year ago. 

If realized, U.S. soybean stocks would be the shortest in nine years.

"This is tight, so anything under the average guess will force the opening trade higher," Hannagan says.

NOT ALL BULLS

Terry Roggensack, The HighTower Report co-founder, says the trend-following funds are going into the report expecting a negative reaction. "Traditionally, this market group builds a corn net long position of 250,000 to 350,000 contracts. As of June 18, they are net short 2,673 contracts."

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