Morning Comments

Mar corn +1 ¾ at 4.94

Mar beans +6 ¼ at 13.7875

The DOW is Down


Crude oil +.45 at 52.70


Good morning,


Overnight grain markets were mixed but head into the morning break modestly higher with the crop report looming large at 11 am cst.

The USDA reported a sale of 120 tmt of old crop beans to unknown at 8 am. This is another 3.2 million bushels to bring the total old crop sales in recent days to 21.7 million bushels when our carryout on avg. estimated at 139 million bushels heading into the report. Higher prices are needed to create sticker shock and shut off new sales.

Market sentiment surrounding the report is very bullish and the now the onus is on the USDA to satisfy that expectation or else there are plenty of new longs that will be looking to exit. In the case of soybeans, the stats are simply too tight for anything other than a near term corrective trade and are supportive of an elevated price structure going forward. If the USDA delivers with any bullish surprise, you could see a daily 70 cent limit move today.

Cordonnier left Brazil soy and corn production estimates unchanged at 128 mmt and 102 mmt respectively with a neutral to lower bias. He lowered his Argentine corn production estimate by 500 tmt to 44.5 mmt and left his soy production estimate unchanged at 46 mmt with a neutral to lower bias going forward.

There is a major USDA crop report at 11 am cst. With a broad brush, the market is anticipating a combination of lower us row crop production and increased demand that will tighten domestic ending stocks. The avg. guess on corn ending stocks tightens from 1.702 bb in Nov to 1.599 bb, bean stocks from 175 mb to 139 mb (this would represent a 3.07% stocks to use ratio, the lowest since 13/14 marketing year that ended at 2.67%) while wheat stocks are seen nominally smaller at 859 mb. The Dec 1 quarterly stocks are estimated at 11.951 bb for corn, 2.920 bb beans ant 1.695 bb for wheat. Winter wheat acres are est. at 31.528 mln overall with hrw at 22.140 mln, srw 5.884 mln and white wheat at 3.514 mln.


Overnight, the corn market started a little weaker, but firmed back up in the wee hours of the night, ultimately finishing a couple cents higher by the morning pause. Wheat is likely the pre-report market feature, trading 10+ higher after Egypt’s tender found only a few competitive offers. In the end, it will be all about the report, and there will be a lot of ground to cover; U.S. production, updates on the domestic and world balance sheets, and Quarterly Grain Stocks (a/o Dec 1). After an 80+ cent rally over the past month (and $2 since early August), most traders are expecting the USDA to report tightening statistics. The analyst consensus is looking for a further trimming of production (to 14.470 bil bu, from 14.507 in Nov/Dec), another uptick in demand (exports?), and a resulting downtick in U.S. corn carryout projections (1.6 expected vs. 1.7 in Nov/Dec). In a sense, the Dec 1 stocks number will incorporate elements of all these and is a logical first headline to study. Analysts expect Dec 1 stocks to land 11.95 billion versus 11.327 in the prior year quarter. Will the USDA find or lose ‘phantom bushels’ (they ‘lost’ them in the prior report)?! Somewhat secondary perhaps will be the world stats; the USDA may start to walk back South American crop production estimates. Analysts expect world corn carryout to come in at 289 mmt versus 283.5 mmt in Dec (and 303 mmt the prior year). Week 3 options, which expire this Friday, are pricing in a ~22 cent weekly move.


Darren, David, and Elizabeth

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