Lots of fireworks occurring in the grains today on the heels of a major USDA report. Currently all of the grains ( I am including beans in this category) are lower even though the numbers for corn and soybeans were initially considered supportive.
USDA lowered US stockpiles for both corn and beans based mainly on an expected increase in exports due to the lower prices we have been experiencing especially compared to last year. However, they did raise total global bean production, mainly due to an increase in Argentinian production. My reading of this report informs me that there is certainly not going to be any acute shortage of soybeans around. Usage has been strong however and that is keeping a floor beneath the market.
Expectations for beans heading into the report were for a reduction in the ending stocks; however, the number was within expectations and prices moved lower on a "buy the rumor; sell the fact" scenario.
Wheat stockpiles are growing. USDA raised the ending number by 10 million bushels above expectations catching some in the trade by surprise.
Overall the report seems to me to have taken the starch out of the recent move higher in corn and bean prices. It will take some further bullish demand news or some bullish supply side news to kick prices into any further strong rallies.
As many of you who regularly read this blog are aware, I keep a close eye on the grain markets, as well as the livestock markets, to try to get a sense of the overall direction of food prices.
Another thing I am taking away from this report - look for used farm equipment prices to get a bit of a shot in the arm from this data. The big banner money years that farmers had been seeing over the last few year years are over for a while. Corn prices are trading about 50% below their record price and while prices for both corn and beans are still good, they are no where near those historic highs. Maybe some good will come out of this in the sense that the hedge funds can stop buying up farm land in the Corn Belt and prices can bet back to more sane levels.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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