By Carrie Muehling
BLOOMINGTON – Last week’s USDA reports sent a bearish signal to grain markets.
The agency increased soybean yield numbers by 1.5 bushels on average, which was higher than most expectations. The increased production by about 110 million bushels was a bearish surprise. The agency also raised demand, so ending stocks did not see a big change.
“Even though the ending stocks weren’t increased that much, I think just the fact that the production was increased and then what we’re seeing in South America here has really seen bean prices fall dramatically over the last few days and continue to offer resistance to the upside,” said Aaron Curtis, commodity risk consultant with Mid-Co Commodities. “As we look ahead in these futures markets, we look from a tight domestic situation to one where we’re going to correct that pretty quickly if South American weather would cooperate and I think that’s what we’re seeing in some of the liquidation in the bean market.”
Soybean exports continue to be very healthy. The combination of increased production domestically and favorable weather in South America will help to alleviate the tight balance sheet in the United States if a large crop is realized in the southern hemisphere. Some analysts also expect more soybean acres in the U.S. next spring, which contributes to a bearish outlook for soybean markets.
There was not much change for corn, with just a slight yield increase Exports are unchanged with carryout up about 28 million bushels. The trade will continue to watch crops in Brazil and Argentina. The corn export program has been nearly nonexistent the last few weeks. Liquidation in the livestock sector is also a factor. Corn did break through the sideways trade to the downside after being in the same pattern for several weeks.
“Corn is kind of left to follow along, here. It did finally trade out of this recent trading range we’ve been in on corn,” said Curtis. “We’ve been in the 30-35 cent trading range for the last six weeks on corn and finally broke through to the down side on that, so that’s offered a little more selling pressure here today, but right now corn more of a follower here with most of the focus being on the bean side.”
Curtis is still watching weekly numbers, including winter wheat ratings on the crop progress report, which are on the low side right now. He is also watching weekly ethanol numbers and weekly export sales numbers. In the bigger picture, how the outside markets and fiscal cliff discussion will influence the funds could important.
Curtis said there was no direct effect on the grain complex from last week’s elections outside of some spillover from the financial and energy markets. USDA will release the next crop production report on Dec. 11, but that is typically a non-event as the trade is heading into a traditionally quieter time for the grain markets.
Carrie Muehling can be reached at email@example.com.