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Jan. 10 market fireworks expected
January reports are notoriously big market movers. For example, corn futures have made limit moves six out of the past seven January report days. Plus, once again, this is a report released during market hours (11 a.m. CST), so fireworks seem very likely.
This past week, corn traders are simply not waiting for the numbers -- they are selling. The downdraft in prices seemed to come simply from a lack of patience. Gone are the conversations about index fund rebalancing and the need for those types of funds to buy a substantial amount of corn contracts this week and next. Weather forecasts for South America have helped, although there are parts of Argentina that need rain. Today, technical damage to the charts and a poor export sales report all ganged up on price.
Just to review, the prereport estimates are for larger corn and soybean crops. The corn crop, based on the prereport surveys, is expected to be up an average of 77 million bushels. The soybean crop may be up 21 million bushels. Widely watched Informa had much larger increases last Friday.
Stocks numbers will also be larger than last year, but remember last year had very small crops and a need to ration demand in the face of inadequate supplies. This year, as always, the focus should be on the corn stocks number and what it says about feed use. The USDA has forecast a sharp rebound in the feed/residual number. While large crops have large residuals (think a slush or error factor), the USDA is currently forecasting a 13% increase in feed and residual per GCAU (grain-consuming animal unit).
The January report does tend to set the tone until planting season (unless South American weather becomes an issue). There will be changes in demand in future reports, but the odds of trend-changing numbers are diminished. The market will slowly switch to focusing on the outlook for 2014. The USDA will not do any sort of work on 2014 corn and soybean acreage until February (the annual Outlook Conference) and March (Prospective Plantings).
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.