Negativity takes over markets
The grain market spit out Monday’s crop reports with a tone of disgust and has proceeded to sell off the entire week.
The reports showed an “as expected” corn crop and a slightly larger bean crop. There were also increases in grain crops around the world. Wheat crops were increased in Canada, the European Union and the Ukraine. Corn crops were increased in Argentina, Brazil and the Ukraine. These larger corn and wheat crops are all in countries that can be formidable competitors with the US in the export market.
The “as expected” corn crop was still small enough that the USDA needed to make sharp usage cuts to end up with a minimum level of carryout. This may be one of those times when just because it is printed on paper doesn’t make it so. This means it doesn’t tell what prices are necessary for this rationing to occur, when it will occur or how other commodities may be impacted.
The market is also unnerved by yield reports from Illinois and Iowa. These early yields are generally better than expected. However, it is harder to determine whether they are better than last year. And Iowa and Illinois are the two large states this year with yields projected to be higher than last year. Other large states (Minnesota, Nebraska, Indiana, Ohio) are forecast to have lower yields than 2010. Yield reports from these states have been minimal.
Going forward, the Grain Stocks report on Friday, September 30th will be key. Feed use is still an important statistic and final 2010-2011 feed use will be derived from this data. Feed use during the third quarter was very low, so it will be interesting to see the fourth quarter number and whether any further cuts in use occurred with the high prices seen this summer.
Note: This was written before the release of the FSA acreage data, scheduled for Thursday afternoon.
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