U.S. an 'island of supply' for grains
In its monthly world Supply and Demand (WASDE) report released Thursday morning, USDA slashed global wheat supplies mainly due to drought conditions in Russia. That continues a trend in other crops that show a clear theme of supply and demand for U.S. crops moving forward, traders say.
"It really shows the U.S. is an island of supply. We have record large corn and soybean yields, record large crops in both, and they will be needed," says Dan Basse, market analyst with AgResource Company.
In its Crop Production report also released Thursday, USDA pegged the 2010 average corn yield to be 165 bushels per acre, while the soybean yield is seen at 44 bushels per acre. "It is too hot for beans to average 44 in my part of the world," says Agriculture.com Marketing Talk member merandaw. "A lot needs to go right over the next 45 days to see 44 [bushels per acre]," adds Marketing Talk member p-oed Farmer.
Traders called the WASDE and Crop Production numbers slightly bullish for the grain trade. After opening higher, the grains turned mixed in morning trading, then rebounded to rally in late-morning trading (Read More).
Moving forward, market-watchers say Thursday's numbers open the door to some considerable downside risk potential moving into harvest, which will likely start early next month in parts of the Corn Belt.
"I'd be cautious about higher money in [the corn and soybean] trades the next 2 days," says Jerry Gidel of North American Risk Management Services. "I'm cautions about how much follow-through we'll see in the corn and soybean markets."