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Crude Oil Pushes Grains Lower Despite Largely Neutral USDA Data

A sinking crude oil market is just too much for the grain bulls to handle right now.

Corn and soybean prices moved lower Monday morning after USDA released quarterly grain stocks, monthly world agricultural supply and demand estimates (WASDE), and annual crop production reports that saw general production and consumption numbers fall within the range of previous trade estimates. 

In its quarterly grain stocks report, USDA pegged total corn supplies on hand as of last December in the U.S. at 11.2 billion bushels, 7% higher than a year ago but well within the 10.82- to 11.54 billion-bushel range of estimates from traders heading into Monday's report. Soybean stocks are pegged at 2.52 billion bushels, sharply higher than a year ago, but also well within previous trade estimates. Wheat stocks were seen at 1.52 billion bushels, 3% above a year ago and close to the higher end of previous trade estimates.

"Off-farm [corn] stocks, at 4.12 billion bushels, are up 1% from a year ago. Off-farm [soybean] stocks, at 1.31 billion bushels, are up 9% from last December. Off-farm [wheat] stocks, at 1.05 billion bushels, are down 2% from a year ago," according to Monday's grain stocks report.

Normally the data would have been slightly bearish to neutral. With the crude oil market tanking like it is now -- with per-barrel futures prices hovering around $46 in early trading Monday -- that market comprises a weight holding down the grains from even fundamental movement based on numbers like those USDA released Monday.

"We're not collapsing, but the grains are moving lower," says Al Kluis, market analyst and broker with Kluis Commodities shortly after the data release. "The corn stocks number confirms we have a lot of corn around, and we're not using it as fast as we thought. Soybeans are a little smaller than expected, but the market is reflecting that lower. When you have $2.20 lower-per-barrel oil, that's not good for grain prices. The dollar is also higher again today."

Moving forward, grain demand will likely continue to be a foregone conclusion, especially when it comes to the soybean export market and continued strong feed and ethanol sectors for corn demand in the U.S. With that being factored in already, production will be the focal point moving into this year's growing season, says Sal Gilbertie, founder and president of Teucrium Trading LLC, sponsor of agricultural commodity funds traded on the New York Stock Exchange.

"Larger-than-expected downward revisions to corn yields and corn ending stocks are the only surprises to speak of in this report.  Continued strong global demand for soybeans is the main contributing factor to all-time high demand for U.S. soybeans, led by a very strong, record-high U.S. export number. Global wheat supplies seem adequate, which is welcome news for end users and consumers cautiously watching Ukraine and Russian export levels," he says. "Overall, the report confirms record demand levels for soybeans and corn; from this point onward, traders and investors will likely focus on the ability of farmers in the coming crop year to meet growing and record global demand for grains."

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