Craig's Closing Comments
by Craig Haugaard
August 12, 2015
Corn:
Uff da. Well, nobody saw this coming. The trade was stunned by today’s USDA report. Coming into the report the average trade guess was that we would see a national average yield of 164.5 bu/acre with total production pegged at 13.327 billion bushels. Instead we were presented with a forecast national average yield of 168.8 bu/acre. This was even above the top end of the range of trade guesses which ran from 160.4 to 67.5 bu/acre. This of course pushed us to a total production number of 13.686 billion bushels, also above the top end of the range of trade guesses. On the demand side of the equation today’s report reflected a 25 million bushel increase in feed demand with an additional 40 million bushels of demand being attributed to the food/seed/industrial category. Twenty five million of that is additional ethanol demand. The net result is that we went from a projected 2015-16 carryout of 1.599 billion bushels in the July report to 1.713 billion bushels in today’s version.
In addition to the USA carryout being sharply increased above the average trade estimate we also saw them take the projected world carryout from 189.95 MMT last month to 195.1 MMT in today’s report.
The question now is, how accurate is the USDA? Is it time to give up hope and all find a tall building with a window to jump out of? I may be overly optimistic but I am of the belief that the numbers we saw today and the best we are ever going to see this crop look. In looking at the state by state breakdown I am seeing some significant differences between what the private analysts are seeing in the Eastern Corn Belt versus what the USDA pegged them at today. Another state that has me a bit curious is Nebraska. Last year we set a new all-time production record of 179 bu/acre and today the USDA projected we would smash that record in Nebraska by 8 bu/acre this year.
Finally, it should be noted that the Chinese were messing around with their currency once again today. In addition to that potentially bearish development I see that, according to Reuters, China will require importers of barley, cassava, distillers' grains (DDGS) and sorghum to register details of their purchases under a new system to come
into effect on Sept. 1st. China is currently trying to work through large supplies of domestic corn and one source I spoke with today believes that this move to register purchases is a precursor to limiting these imports.
With todays sharply lower close it is no surprise that all three of my technical indicators are now bearish both the September and December corn futures.
Soybean:
I can’t think of anything that represents today’s price action any better than the following picture.
What happened today was truly painful. The trade was fully expecting a reduction in planted and harvested acres as a result of the re-survey of acres and also felt that we would see the projected national average yield reduced as well from that posted in the July report. The net result was that the average trade guess was that we were going to see a projected carry-out for 2015-16 of 301 million bushels. That is obviously not what happened. Today’s report did reduce the harvested acres by 900,000 acres but in a move that shocked almost everyone they increased the projected national average yield by 0.9 bu/acre over the July report. They also increased crush by 20 million but loped 50 million off of projected demand. The later move I believe was recognition of the slow pace of sales we have seen to China for the new marketing year. The net result was that instead of the anticipated 301 million bushel carryout we were given a number of 470 million bushels and the race to the basement was on.
On the world scene we saw the projected 2015-16 carry-out slip from 91.8 MMT in July to 86.9 MMT in today’s report.
As I suggested above in my corn comments I believe that the numbers we saw today are the most optimistic numbers we will see for beans this year and I would expect the carry-out number to slip as we get into harvest time. I would also note that the Chinese currency games have the greatest potential to hurt bean demand so we will want to keep a very sharp eye on economic developments in that nation.
At the present time all three of my technical indicators are bearish both the September and November futures.
Wheat:
The wheat report was more of a non-event. Today’s report made slight bearish adjustments to the balance sheet but the real reason for the down move in wheat today was pressure from the corn and bean markets.
In today’s report the USDA increased domestic ending stocks as well as the world ending stocks. They pegged all USA wheat production at 2.136 billion bushels, down 12 million from last month. They also have the 2015/16 carryout forecast to be 850 million bushel which is up eight million from the July report.
On the world front the USDA raised its 2015-16 world production forecast by 4.6 MMT while also pumping up the global ending stocks to 221.5 MMT, an increase of 1.7 MMT from last month.
At the present time all three of my technical indicators are bearish both the Minneapolis and Kansas City September futures.
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