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Today's noon radio report is part of my commentary. Click the link below.
Market talk link here
The trade is now awaiting Thursday's official data from the USDA. Bloomberg survey results for Thursday's report pegged US corn yields at 122.8bpa on production of 10.616 billion and ending stocks 656mb. Soybean yields are pegged at 36.9bpa on production of 2.763 billion and ending stocks 135mb. Wheat ending stocks were pegged at 627mb. Despite Informa's bearish (as usual) estimates, other, private estimates were more bullish on Friday as Lanworth, which claims to use satellite-based technology, charges a very, very pretty penny for their service and most importantly, has a track record of being wildly wrong, pegged US corn yields at 120.2bpa on production of 10.395 billion bushels, with soybean production pegged at 2.735 billion bushels. Traders will be very closely following any changes in harvested acreage as ideas are extremely mixed as to what the USDA will do there. Some believe the severe drought will lower acreage significantly while others believe the USDA has tipped their hand towards higher acreage due to preliminary FSA certified acres coming in a bit higher than expected. Some analysts suspect that the longer ag prices remain under pressure, the higher prices will go later to slash demand.
The fact that basis/spreads have stayed bullish during harvest is a strong signal to end users that the time of cheaper futures may be drawing to a close as outlined in this report from Bloomberg News. Grain prices that tumbled in recent weeks may rebound as demand stays robust while global stockpiles tighten after drought hurt crops from the U.S. to Russia. While farmers are harvesting crops across the Northern Hemisphere, temporarily inflating supplies, world corn and soybean stockpiles as a percentage of consumption may drop to a 37-year low after dry weather in the U.S., South America and Europe, U.S. Department of Agriculture data show. Corn may rally to $10 before this time next year because cattle and hog producers haven't culled herds even as feed costs rose, Hussein Allidina, head of commodities research at Morgan Stanley, said Oct. 3 in an interview at Bloomberg News offices in London. Barclays Plc analyst Sudakshina Unnikrishnan expects CBOT soybean prices to rally to $18 a bushel, above the all-time high of $17.89 set Sept. 4. "It's a time to keep your nerve and wait for the markets to rebound, because they probably will," said David Sheppard, managing director at Gainsborough, England-based grain exporter Gleadell Agriculture Ltd. "We're in the calm before the storm with world grain markets. Russia and Ukraine are running out of exportable surpluses. France is selling quite aggressively into recent tenders, and if it carries on at the same rate they'll probably be overselling."
Outlined in this report over the weekend from CIS, Inc., it will likely be the spreads/basis that does the heavy lifting over the winter unless South American crops get in trouble and/or the USDA delivers a bullish S&D report Thursday or a bullish stocks report in January.Over the past two years, the USDA September 1 stocks report has been about 300 million bushels above trade expectations. It was generally attributed to corn harvested before September 1 being counted in old crop stocks. This year, corn harvest was even earlier and the USDA estimated about 1.2 billion bushels were harvested before September 1. Therefore, the trade was anticipating another September 1 stocks report larger than calculated. However, this time the USDA shocked the trade by reporting stocks about 150 million bushels below expectations. Therefore, if 1.2 million bushels were harvested before September 1 and the same proportion was utilized during August as in the past two years, the "real" September stocks of old crop corn may have been as low as 700 million bushels. If that is the reason for much lower stocks than calculated, it would explain why supplies were extremely tight during last summer and why users were paying record premiums above futures to obtain needed supply. This year's September stocks report does nothing to explain the sizeable discrepancies of the past two years. The fact that this year's stocks were considerably below calculations while the preceding two years were well above only compounds the problem. Because the trade can no longer depend on reliable USDA statistics, futures can be expected to respond more and more to anecdotal forces and less to longer term fundamentals.
US Dollar Daily Chart
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10-08-12
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NOTE: With the exception of livestock, all trades will be entered in the electronic markets unless otherwise noted. Hedge recommendations and Trade recommendations are totally separate, and may sometimes conflict with one another. It is strongly suggested that Spec trades and Hedge trades be done in separate accounts.
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A word to the Wise
Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable to Heartland Investor Capital Management , Inc. but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK of LOSS involved in trading futures and / or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL . NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. The information contained in this newsletter is privileged, confidential and protected from disclosure. Any further disclosure or use, distribution, dissemination or copying of this message or any attachment is strictly prohibited.
Newsletter provided by Heartland Investor Capital Management, Inc. a registered CTA with the NFA, of which Eugene Graner is principal. This entity is a separate legal entity from the Introducing Broker Heartland Investor Services.
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