(AgriNews) – It’s been couple of weeks since the planted acres report took the commodity market by surprise with its record soybean area, but the news continues to rattle the trade.
The U.S. Department of Agriculture’s world supply and demand estimates report issued July 11 included the record-breaking 84.439 million planted soybean acres adding to an already red price screen.
Ending stocks for both old- and new-crop corn and soybeans were increased in the report, adding to the bearish environment.
However, Jim Bower, president of Bower Trading, said it’s important to look at the report in the context of the commodity market in general.
“There does seem to be an air about the market right now that it just seems to want to let the commodity market sink lower,” he said in a Minneapolis Grain Exchange-hosted teleconference.
“We’ve seen quite a bit of pressure pretty much across the screen on the ag indexes, and I think there’s just kind of a psychology right now not just in the United States, but globally that we’re adequate in supplies and the weather has been benign enough across the planet to warrant a move lower.
“I think the market almost wanted to see and get this report out of the way.
“This market acts to me as trader, not a grower, but as a trader, like it almost wants to get down and take as much air out of it as possible and we’re probably going to make our lows earlier in the growing year than we normally do and that’s pretty evident when the market takes this kind of hit this time of year.”
USDA increased old-crop corn ending stocks from 1.146 billion bushels last month to 1.246 billion in the July report. The average trade estimate was 1.232 billion.
New-crop corn ending stocks was estimated at 1.801 billion bushels, up from 1.726 billion last month and above the trade guess of 1.774 billion.
USDA left the yield unchanged on this report at 165.3 bushels per acre.
August Yield Hike?
“So now we have a 1.8 billion-bushel crop despite no change in yield,” said Rich Nelson, Allendale chief strategist.
“The trade will certainly assume the yield will be increased on the August report and, therefore, consider the idea of maybe 1.9 billion-bushel ending stocks perhaps being seen on the August report.”
Old-crop ending soybean stocks last month was estimated at 125 million bushels and increased to 140 million bushels this month, slightly above the average trade guess of 128 million bushels.
New-crop soybean ending stocks were raised from last month’s 325 million bushels to 415 million, three million below the trade estimate.
“The numbers across the board can be viewed as bearish. The question we will ask for the next couple of weeks is whether this has been priced in,” Nelson said.
Bower said there has been a large amount of liquidation since the June 30 planted acreage and quarterly grain stocks reports.
“Everything from coffee to even sugar and even cattle had a major sell-off, and now we’re seeing a sell-off further in the ag sector,” he said.
Tighten Belts
“I guess the producers are going to have to tighten their belts here a little bit. We may be going through kind of a tough period over the next six months to a year.
“It’s going to take some time to straighten this thing out if we keep getting these yield projections without any hardship to the crop pretty much across the Northern Hemisphere.
“It’s a sobering report. Certainly not one the U.S. producer wants to hear. Based upon the way the market acts, the market wants to let the air out of this market as soon as possible and then see what happens in August.”
