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USDA data still smells

04/01/2013 @ 2:00pm

What now? That seems to be the obvious question for farmers wondering where the corn and soybean markets will stop falling from those nasty-bearish USDA March Planting Intentions and Quarterly Stocks Reports.

Apparently, the Easter Bunny left rotten eggs at the doorstep of many farmers and traders who are still feeling like they ate a basket-full of them.

How nasty were the USDA Reports? Well, on March 27, 2013, a day before the government released its data, the May CME Group corn futures contract traded around $7.36 per bushel. At the time of this writing, April 1, 2013, May corn futures dropped 53¢ to a new nine-month low at $6.42. Let me do the math for you: That is a 94¢ drop in the market in two trading days -- two! And many wonder if this is it.

In fact, the April 1 corn trading session moved the most it had ever moved, during an expanded trading limit day. Monday's expand trading limit was 60¢, compared to a regular 40¢ daily limit.

Scott Shellady, The Trean Group analyst and CME Group floor trader, says the market is still digesting the overly bearish data, four days later.

"Just a lot of puking. USDA really caught the market wrong-footed," Shellady says. "With acreage estimates so high, the market thought that the probability of a lower acreage number was higher. So, people in the market were set up 'long' without any real concern for stocks," Shellady says.

In its March Planting Intentions Report and Quarterly Grain Stocks Reports, the USDA pegged the U.S. corn acreage at 97.3 million, in line with the average analysts' estimate and compared to last year's seedings of 97.2 million.

For soybeans, the USDA estimates 2013 acreage at 77.1 million, vs. the average analysts' estimate of 78.5 million and last year's seedings at 77.2 million.

The damage did not stop with the acreage estimates. Four days later, the USDA data still smells, according to Darrell Good, University of Illinois Extension.

On Monday, the USDA numbers were still being talked about amongst the CME Group floor traders. "And the stocks kind of stuck it to them (traders). In football terms, it's known as a reverse," Shellady says.

In its report, the USDA pegged the U.S. corn stocks, as of March 1, at 5.40 billion bushels, compared to the average analysts' estimate of 5.030 billion bushels.

For U.S. soybean stocks, the USDA estimates 1.00 billion bushels, compared to the average analysts' estimate of 947 million bushels.

On the day before the infamous USDA Report, Ken Smithmier, grains analyst for The Hightower Report, a research firm, shared that his firm's really bullish corn outlook had tempered.

Regarding old-crop corn, "We're not seeing a steep rally. Since the first of the year, we have seen the spreads in corn do a better job of cutting demand. We have done a good job of rationing corn. We have more to do. But, we have rationed quite a bit."

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