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Trade expects lower USDA crop numbers
The USDA is scheduled to release its monthly Crop Production and Supply/Demand Reports next Wednesday, November 9.
In general, the trade is expecting the USDA to lower corn and soybean yields in the November data.
This week, two private firms released early corn estimates for next week's report, both came in higher than the USDA's previous estimate. The two private firms estimate the average U.S. 2011 corn yield at 148.4 bushels per acre and 149.5, up from the government's October yield estimate of 148.1 bpa.
Separately, AgResource Inc. expects a corn yield of 145 bushels per acre and a 40.4 soybean yield estimate.
Dan Basse, AgResource Inc. research director, just doesn't think the farmers got the crop this year that they wanted. "Farmers joke with us. They tell us they got 240 bushel corn. After a long pause, the farmer will say I got 200 bushels at one end of the field and 40 at the other end. And that is the variability that we have seen this year," Basse says.
Basse adds, "From our producer data that we collect from combine reports, we think yields are going down not only in November but January's report also."
After being bombarded with world economic turmoil and a fledgling brokerage firm, next week's report will give the corn, soybean and wheat markets a chance to focus on fundamentals, Basse says.
"Getting the numbers will be one thing for the market to consider. But, longterm the corn market has a rationing function to accomplish, which is why we have seen cash basis run up 40-50 cents. We also see shortages of corn in the eastern Corn Belt even larger than last year.
Aside from yields, the USDA is seen cutting their soybean export estimate due to lagging sales pace.
Jim Bower, Bower Trading Inc., says the USDA could be hard-pressed to leave its export numbers alone.
"While the U.S. has sold 35 million bushels of corn to China since the last supply/usage revisions, there has not been enough of a lag in shipments to others and increased South American production prospects for the USDA to leave its export projection unchanged," Bower wrote in a customer newsletter Friday.
U.S. Ending Stocks
Aside from seeing the report as a 'yawner', Tim Hannagan, PFGBest.com senior grain analyst, will be eyeing what the USDA will use to adjust feed usage and demand. "Will they do like the last two months and lower usage to offset declining production to curb fear that we're running out of corn and beans? Or, will USDA use what they traditionally do and take the prior months usage figures to apply to the crop report," Hannagan says.
If the prior months figures are used, U.S. corn ending stocks will drop, as the cattle on feed report showed a surge in cattle placed on feed to be fattened on corn and the October weekly export sales were double the September average, Hannagan says.
A modest increase in world grain production is expected in next week's report, Basse says.
Beyond the Report
Once the report is out and digested, some analysts see another correction in corn prices, as demand has slowed on the recent price. "China, a key player, and other importers' buying needs have been met on price corrections. And they are backing off on rallies," Hannagan says.
Overall, this report should shed some light on the corn and soybean demand argument and trying to understand if the world's slowing economy has had an impact on world demand, Basse says.