Commodity prices impacted by January 2015 WASDE Report

Jan 13, 2015

Corn, soybeans, and wheat all down upon opening

By Diego Flammini, Farms.com

Farmers and producers of soy, wheat, corn, and other agricultural commodities waited anxiously for the United States Department of Agriculture to release their World Agricultural Supply and Demand Estimates (WASDE) monthly, Quarterly Grain Stocks and Wheat Seeding reports. Commodity experts are recommending farmers take distinct actions for different cash crops. Here, we look at how wheat, corn, and soy faired after the report’s release.

Wheat
Wheat futures did close lower as higher ending stocks and higher global numbers weighed, but is gaining support at $6.00/bushel. The 2.1 million acre dip came out of nowhere and could be a shot in the arm for wheat but it’s still too early to tell. It all depends on the winter kill damage in the next few months from the Black Sea Region and the U.S.

WASDE reports U.S. wheat supplies for 2014/15 slightly increased on beginning stocks with projected stocks up 33 million bushels. Average farm price projected to be 10¢ higher per bushel ranging from $5.90 to $6.30

Farms.com Risk Management’s Chief Commodity Strategist Moe Agostino’s recommendation is to wait for higher wheat prices after the recent fall from mid-December 2014 highs.

Corn
Stocks, production, and yields are all lower than expected could keep the funds from selling but lower soybean futures could weigh on prices short-term. If the USDA March Planting Intentions report shows a 2-3 million acre loss, corn futures could be supported at the $4.25 - $4.50 per bushel by the end of March with a better demand picture and a possible jump to $5.00 per bushel if one throws a weather problem into the mix. Farmers have enjoyed an upward sloping uptrend in corn futures since the bottom in October of 2014 despite a record US crop but will this trend continue? The trend is your friend for now.

WASDE reports total projected corn use for 2014/15 down 75 million bushels with lower feed and residual use offset by corn used to produce ethanol.

Soybeans
Higher yields, ending stocks and global numbers were responsible for the price of soybeans dropping. The next 45 days will be important. If the weather in South America stays the same, soy prices could drop even further.

Agostino recommends selling soy on a bounce saying producers should be 100% sold on their 2014/15 soy crop, and 50% sold on their 2015/16.

The next regularly scheduled WASDE report is to be released Tuesday, February 10, 2015.

Video: Will the 2025 USDA December Crop Report Be a Market Mover/Surprise?

Historically, the USDA December crop report is a non-event or another dud report as the USDA reserves any final supply changes to the final report in January of the following year in this case 2026. But after the longest U.S. government shutdown in history at 43 days and no October crop report will they provide more data/surprise and make an exception?
Our China U.S. soybean purchase tracker is now at 26.6% or a total of 3.2 mmt but for traders it’s taking too long to unfold.
The final Stats Canada production report was bearish canola and wheat projection a record crop in both (it adds to the global glut of supplies) and bullish local corn and soybean prices in Ontario/Quebec thanks to a drought. It will not help the fund flow short-term, the USDA may need to offset it?
A U.S. Fed interest rate cut of another 25-basis point next Wednesday (probability 87.1%) could help fund flow and sentiment in stock and ag commodities into year end.
More inflows into Bitcoin this past week saw prices rebound back above 90,000 with support at 82,000 and resistance at 96,000.
A V-shaped bottom in cattle suggest the lows are in after Mexico reported another new world screwworm case. Lower weights, seasonal demand and higher U.S. beef select/choice values with a continued closure of the Mexican border to cattle will result in a resumption of higher cattle futures into yearend.
Australia is expected to produce its 3rd largest wheat crop ever at 36 mmt adding to the global glut of supplies.
Reports of ASF in hogs in Spain the largest pork exporter in Europe could see the U.S. win more pork export business long-term.
If the rains verify into next week of 3-5 inches for Brazil it would go a long way to fixing the dry regions from the last 2-months, but the European weather model has been wrong for the past 2-months!
Natural gas futures are surging to the 3rd price count as frigid hold temps set in.
CDN $ is also surging to end the week on a very resilient economy and better employment numbers suggesting no interest rate cuts next week.
Finally, the CFTC report showed funds were net buyers of soybeans but sellers of corn, canola and wheat. In real time the funds have gone back to selling as they take some profits.