How do you spell relief? Lower corn ending stocks
Federal officials rolled out what amounts to a sigh of relief in USDA's Grain Stocks and World Agricultural Supply and Demand Estimates (WASDE) reports Friday morning.
The numbers showed a 2013 corn crop size number at 13.9 billion bushels, just below that magic 14 billion number that traders and analysts feared might be a one-way ticket to corn prices with a "3" in front of them. Now there's hope that USDA's data will offer more farmer-selling opportunities between now and spring planting based on factors like the export market and domestic grain consumption, analysts say.
Friday's USDA reports show a corn ending stocks number of 1.631 billion bushels, down from previous trade estimates closer to 1.8 billion. Soybean yields were pegged slightly higher than earlier guesses, while ending stocks were seen right in line with what the trade expected. The numbers were neutral for soybeans, though the bullishness in the corn pit -- which pushed nearby futures up 10 cents in trading just minutes after the reports were released -- could make its way into other pits.
"Clearly the trade expected neither the yield reduction nor the surprisingly reduced December 1, 2013, corn stocks number, which could result in some significant near-term short covering," says Sal Gilbertie, Teucrium Trading LLC senior grain analyst. "Global corn usage estimates were raised again, indicating increased demand likely in response to the lower price of corn last year.
"Overall, the report seems to confirm what many in the trade have been saying, that low prices are buying demand, especially in corn and soybeans," Gilbertie adds.
Friday's crop numbers send a clear signal to farmer-marketers: "These numbers are going to give the producer holding onto grain a big sigh of relief. We had a good crop, but it wasn't a great crop," says Jason Roose, analyst and broker with U.S. Commodities in West Des Moines, Iowa.
"We were heavily oversold going into the crop report. The trade was bracing for a very large number, not only bigger yield, but stocks and heavy farmer selling," he adds. "Then, as you see the report, just like the last crop report, it just was not as bearish as the trade was expecting. In fact, this may even have a touch of bullishness to it, with lower yield and lower stocks."
Roose says that had the corn production number for the 2013 crop been at or above 14 billion bushels, corn would be trading in the $3/bushel range. But Friday's numbers give some hope that the $3s may not be a constant moving into spring. While there now will likely be more movement in either direction moving forward -- not just the mostly lower trend of the last few weeks -- the trading window won't be as wide-open as it has been in recent years. That will put a premium on farmer-marketing to capitalize on smaller rallies.
"The corn market is at fair value for what we know. On big breaks, we're going to see strong end-user buying, and we'll see exports pick up. That's why at these levels, it's probably very good for our exports. If the market rallies too much, we will see aggressive farmer-marketing in the range where we are now," Roose says. "I think with these higher prices today, farmers are going to be watching 10-cent moves rather than 50-cent moves to do some marketing, and I think that's why good, solid marketing this year's going to be more important than in the last few years."