"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


Tuesday, September 30, 2014

USDA Grain Stocks Report

Well, we got the numbers this morning. With the exception of the beans, they were not pretty. I tend to overlook this report at this time of year however because the industry is now looking at the new crop as harvest is running at full speed ahead and the new crop is coming into the bins and into the distribution pipeline.

The old crop carryover is interesting but it is backward looking and thus, in my view, not all that important as far as the price discovery process goes. It shows us that which has been, not that which shall be, other than the fact that it reveals the demand/supply picture for the previous crop year. That is why, as long as I have been trading grains, I still do not understand the market's obsession with a backward looking number. It is so out of character for the FUTURES market which is supposedly a forward looking market. Judging or estimating demand from one crop year to the next has never made sense to me as it is not how end users operate.

That being said, the market responded rather wildly to the bean number. Old crop carryover was expected to be somewhere in the vicinity of 130 million bushels. Instead it was 92 million! That is a pretty significant miss on the part of traders. It does tell us that demand for beans has been very strong as end users were experiencing some difficulty in securing enough here domestically while they wait for the massive new crop to arrive.

However, new crop is already flowing into the distribution channels. Also, based on the last USDA report, carryover for the 2014 crop is expected to be 4X larger than last year. That should go a long way to dispelling any notion of panic buying by bean users! One crop year can make a huge difference and that is exactly what we are seeing. Bean demand has been strong but it will need to be in order to absorb this year's massive crop and the expected large crop coming out of S. America once more.

On the corn side of the equation, the miss was also very large but in this case it was a miss that underestimated the amount of old crop carryover. Traders were looking for something in the vicinity of 1.181 billion bushels. Instead we got 1.236 billion left over. Throw a huge corn crop coming to market and we are going to have a lot of corn to move over the next year.

Wheat was also underestimated with the average expected carryover near 1.894 billion bushels. Instead we got 1.914 billion.


  1. This comment has been removed by the author.

  2. Thanks Dan.

    I'm glad to see that Argentus Maximus name was recently added to all the Craig Hemke articles that until just recently didn't make that important distinction.

    Not that it matters any longer but I wonder how long it would've taken (if ever) unless a bright spotlight wasn't just shone onto it?
    Articles going back MONTHS didn't have AM's name on them as recently as this weekend.

    I'm glad to see that practice has been extinguished. We'll see.

  3. There’s chatter that a commodity fund is liquidating and that’s what’s caused the sharp drops in oil, silver and some metals.
    ...calpers had announced previously it is leaving commodities and hedge funds.

    good blurb: Corn found 7 years that were record and slow harvestsback to 81/82. Best guess is that prices bottom 2H Oct.

    In North Dakota, corn prices at two grain elevators have dropped to levels producers thought they’d never see again: $1.73 at one facility, $1.81/bu. at another. Bids at a third elevator near Minot, N.D., were 43 cents higher than the lowest bid at $2.16 on Sept. 29.

    Tighter soybean stock number simply implies USDA under-estimated 2013 production; Demand is largely known for beans.


  4. GLD down to 769.86 metric tonnes tonite (-0.31%).

    can't find a link supposed to be wsj, but farmers been talking about 'one oz of gold buys the most bushels of corn ever'.

    farmers are getting a bit freaked out, our competitors russia, europe, and brazil low currencies are making their ags so cheap and we have massive shipping costs to get our ags anywhere.

    WASDE may be overstating 2014/15 US soybean exports if South America clocks in with record 2015 soy crop.

    the trade sees 9/15 US soy stocks over 600 mb, so that 92 mb ending stocks today should not matter.

    for the month, meal down 31%, beans off 16%, wheat down 12-13% and corn loses 11%.

    generally speaking , there are people who trade monthly charts and perhaps even quarterly chart signals. those people would be trading the next few sessions and would tend to keep things that are weak from bouncing much for awhile. (if you were thinking about catching a falling knife)

    China is closed tonite … for a week! The “Golden week” national holiday is from October 1 to 7, so China will reopen on Wednesday 8th October.


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