(Agriculture.com) – With the USDA’s expected move Wednesday to show a rising amount of U.S. corn on-hand, the trade sees continued market pressure.
On Wednesday, the USDA June Supply/Demand Report will be released at 11:00am.
U.S. CARRYOUTS
For corn, the trade sees the USDA pegging U.S. 2014/15 carryout at 1.859 billion bushels, compared with the government’s May estimate of 1.851 billion. For 2015/16, the U.S. corn carryout is estimated, by the average analyst, at 1.779 billion bushels, compared with the May estimate of 1.746 billion.
A jump in the new-crop corn carryout would be only the second time this has happened in the last 11 years, and the first since 2007, according to FC Stone-Intl.
For soybeans, the analysts average estimate for U.S. 2014/15 carryout is 339 million bushels, below the USDA ’s May estimate of 350 million. For new crop, the U.S. soybean carryout is estimated by analysts at 487 million bushels, compared with the USDA’s May estimate of 500 million bushels.
Matt Pierce, Futures International LLC, says that the trade has doubts as to what the government will do with the numbers.
“For instance, are old crop beans taking into account the massive crush numbers and solid exports and shipments? I doubt we see any adjustment to corn stocks but higher would not shock me. Wheat could see lower exports but I doubt it,” Pierce says.
PRODUCTION
The USDA isn’t expected to make changes to U.S. corn and soybean production estimates Wednesday.
Last month, the USDA pegged the U.S. 2015-16 corn crop at 13.651 billion bushels, the U.S. soybean crop at 3.846 billion and the wheat at 2.096 billion bushels.
“I doubt they change yields,” Pierce says. “But, if they do, corn should go higher and soybeans should remain flat. Wheat production should remain unchanged, unless they raise production expectations for HRW due to great early crop conditions.”
Angelo Vignola, HF Grain trader on the CME Group floor, says that this week’s report could be overlooked. “This report could turn into a non-event, the following report (June 30th) will have more of an impact. The USDA will have a better handle on estimates later this month.”
Pierce agrees that the June 30th Quarterly Stocks Report will be deliver more of a market impact than Wednesday’s report.
“The trade is indeed waiting for the 30th report. Talk of plant prevent acreage in KS, and MO puts corn acreage under the microscope. Stocks for beans will be the most interesting factor in my mind with corn and wheat stocks rather boring,” Peirce says.
Pierce adds, “Weather between now and the report both domestically and internationally is important but what is more important is strength or weakness in the USD moving into the end of the month.”
Helen Pound, Wedbush Futures vice-president, says the bottom line is that a lot of negative fundamentals have already been priced in. So, additional negative news could allow markets to challenge lows, but the biggest price pressure will occur as corn and beans reproduce, she says.
“We have a lot of negative fundamentals, but they seem to be overshadowed by the need to reduce position size. It think it’s likely that the WASDE report will look bearish, but I’m not sure it will be bearish enough to take us to new lows, given weather uncertainties,” Pound says.
Pound addes, “In general, I think that the corn market is stuck in a trading range until after crop reproduction. I think beans and wheat are trading at premiums over corn that could be eroded once traders become more confident about the size of the wheat harvest, and the number of bean acres planted and also bean flowering and podding.
Pound sees the pace of the cash market trade as important. “In general, I think end users are trying to remain as much “hand to mouth” as possible. So, if there is a bullish shift in production expectations we could see a sizable increase in forward coverage. Also, this limits the downside in the short run, as end users buy each time prices break to new lows.”
WORLD NUMBERS
The trade will keep an eye on any adjustment to world numbers with expectations of a higher Brazilian corn and lower Indian wheat, Pierce says. No adjustments are expected for Argentina.
