USDA feeds bears with crop size, stocks
In its monthly Crop Production report released Friday morning, USDA moved 2012 corn production up slightly and bumped soybean production by 4%. Both are lower than 2011, but the higher crop sizes are expected to have a bearish effect on grain futures.
In its monthly World Agricultural Supply and Demand Estimates report, also released Friday, USDA raised U.S. wheat ending stocks by 50 million bushels, corn ending stocks by 28 million bushels and soybean ending stocks by 10 million bushels.
- Chat the numbers in Marketing Talk
- Read more: Reports seen as bearish
- See the full USDA Crop Production report
- See more from Friday's WASDE report
The numbers are bearish for prices Friday and into the near future, traders say. That's because Friday's numbers added breathing room to markets that were previously in a tightening supply situation. Larger crops and larger ending stocks add up to a bearish jolt, but at least for soybeans, the big question will be "for how long?"
"The government raised China's soybean imports, so they're saying China is very much alive," says U.S. Commodities grain broker and analyst Don Roose. "When you look at this report, our cushion continues to grow on soybeans. We had much bigger production than we thought around mid-summer. It really is a tribute to the spotty light rains and tells you what we can grow in adverse conditions."
So, both crop size and export demand are seen rising, 2 factors that ordinarily would more or less cancel out one another. Friday's data doesn't send the script too far from that scenario, but there's still a bearish tint to the post-USDA report glasses.
"What we're saying is this market is still rangebound, but keeps moving lower," Roose says. "We're in a seasonal slump. The farmer here in the U.S. is boxed in to holding supply. These will be drifting markets, we think."
So, how long does the market stay focused on these types of factors instead of the larger macroeconomic issues happening in the U.S., namely the "fiscal cliff," or expiration of tax breaks slated for the end of the calendar year? Looking ahead, that window will open later this month, says grain market analyst and Successful Farming magazine columnist Al Kluis of Kluis Commodities.