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USDA data reaction is mixed

DES MOINES, Iowa (Agriculture.com)--The U.S. farmer will produce less corn and less soybeans in 2011 than the trade estimates, according to the USDA Wednesday. 

The trade sees the data as slightly friendly. Early calls for the commodities are 3-5 cents higher for corn, 5-10 cents higher for soybeans, and wheat is  expected to follow the floor trend.

In its October Crop Production Report, the USDA pegged the U.S. 2011 corn production at 12.433 billion bushels vs. the trade estimate of 12.492 billion bushels and the government's September estimate of 12.497 billion bushels.

For soybeans, the USDA places the 2011 production at 3.060 billion bushels vs. the average trade estimate of 3.094 billion bushels and the agency's September estimate of 3.085 billion bushels. 

Yields

The USDA estimates the U.S. corn yield average at 148.1 bushels per acre, compared to the September estimate of 148.1 bushels per acre. The U.S. 2011 average soybean yield is pegged at 41.5 bushels per acre vs. the trade's average estimate of 42.0 bushels per acre.

U.S. Carryout

The USDA raised the 2011-12 corn stocks on-hand. For corn, the U.S. carryout is estimated at 866 million bushels vs. the average trade estimate of 795 million bushels and the USDA's September estimate of 672 million bushels.

U.S. soybean carryout is estimated at 160 million bushels vs. the average trade estimate of 181 million bushels and the government's September number of 165 million bushels.

In its Wednesday morning report, the USDA placed the 2011 wheat carryout at 837 million bushels vs. the trade's average estimate of 747 million bushels and the government's September estimate of 761 million. 

Trade Reaction

Jack Scoville, PRICE Futures Group vice-president, says the report is bullish for the soybean market, a little negative longterm to corn and wheat.  

"Production and ending stocks estimates came in below expectations in beans. So, beans could rally pretty strongly early in the day. But, higher-than-expected ending stocks in corn and wheat will hurt prices there today. My calls are higher, maybe 20 or 25 higher, corn perhaps a little higher, maybe 5 cents, and wheat more steady to lower," Scoville says.

Jason Ward, Northstar Commodity Investment Co., says the report is negative for corn, due to the ending stocks coming in over trade estimates by 60 million bushels. "So, by itself, that is negative. I don’t really understand how they (USDA) lower exports, but they did by 50 million bushels. Corn yield stays the same and harvested acreage declines 500,000 acres."

Ward adds, "This report seems bearish corn, gotta be 20 cents lower after yesterday’s big up day. Biggest change in corn was the addition of the stocks “found” in the Sept 30th Grain Stocks. This needed to be accounted for and it was."

For soybeans, the yield declined 3/10 of a bushel and harvested acres declined 100,000 acres. USDA cut soybean exports by 40 million bushels. "That is agreeable with me," Ward says. Bean calls for today's trade, by themselves, would be 10-15 higher easy but wheat and corn were both negative so they will likely weigh on it."

Bryan Doherty, Stewart-Peterson market research analyst, says the report's wheat ending stocks were much larger than expected. "This is a surprise."  

The other surprise is the report's upward revision of U.S. corn stocks from trade expectations, Doherty says. "The corn yield unchanged could also be a small surprise, for the market." 

Doherty adds, "However, with a 25% drop in corn price, this should increase demand. Specifically, this should spark China buying."

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