USDA’s Report Gives Puzzling Mixed Signals

Dan Maltby, principal of Dan Maltby Risk Management of Minneapolis, has made a career of grain tradinng, and offers unique insight into the commodities markets. In this era of volatile markets, his insight is more crucial than ever. We thought your might appreciate his thoughts on today’s WASDE Report. Questions for Dan? E-mail him at: danmaltby.riskmgmt@gmail.com

USDA issued new updated World Supply and Demand Estimates today, which clearly disappointed corn bulls. To be honest, a careful reading of the fine print makes me wonder “what the ?”…

FUTURES: wheat rallied, especially Minny, up 16. KC up 8, Chgo up 6. Corn, though, down 8, and that was after a dime rally. Beans up 44, and now back to thinking about a new contract high…

Last marketing year’s corn carry out was increased by 60 million bushels, although the USDA said much of that was because 1.2 billion bushels of this marketing year’s corn was available before Sept. 1. The more I think about that, the more I say “huh?”

Corn exports expected for this marketing year were cut by 50 million, although feeding was increased by 75 million. Production was dropped 62 million, as expected yield was down about a half of a bushel, yet harvested acreage did NOT change. Net effect of the corn situation is this marketing year will now end up with 83 million more bushels than estimated in August. I admit I’m not a believer…

USA wheat’s NET balance sheet was not changed at all, although they shifted some class numbers by dropping HRW exports 25 million, at the benefit of HRS and SWW. Both spring wheat and soft white are heavily exported off the PNW. Apparently the USDA is not concerned about the looming labor contract lapse and potential strike…

Nor did they increase spring wheat yield, nor increase spring wheat imports.

Maybe they know something about the spring wheat imports, because so far, Canadian sales into the States are very, very slow to develop.

SPREADS: Minny/KC Dec moved 8c, closing near 40c and possibly ready to test old chart resistance.

BASIS: spring wheat was posted relatively steady, as were milling winters. Cash price of milling 13 springs and 12 winters are virtually even money today.

I’ve been in meetings for a couple of days, and a pretty sharp trader tells me HRW feeding could be underestimated by 50 million bushels. That could happen, but since we suddenly seem to be swimming in corn, maybe he’s a bit aggressive on his estimate.

SPREADS: wheat/corn has moved 60c in a month (more than that in the KC wheat vs Chgo corn). Hmm. i guess the USDA is correct. We must be swimming in corn…

I see Egypt’s GASC bought more Russian wheat (surprise!), Ukranian wheat, AND French wheat. Prices continue to escalate about $7 a week; although as pointed out recently, these purchases are for November, and the market is in a carrying charge structure.

For the record, I do not think Northern Hemisphere wheat works to Egypt yet (maybe never as the Russians seem to have an unending supply…), although very good sources tell me they would like to buy USA soft white.

One last note on the WASDE updates; world wheat carryout was down slightly, BUT world wheat usage was down more than that, so actually, the world wheat stocks/use ratio is very slightly fractionally easier. Why? Because wheat feeding was cut, because you guessed it…we are now apparently swimming in corn.

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