Commodities: USDA report shocked traders

By Jason Sagebiel, FCStone | August 26, 2015

Corn is trying to make headwinds despite the USDA increasing its production outlook in August. In addition, outside influences will limit upside momentum. In August the USDA increased the corn yield and ultimately production, which sent futures plummeting 36 cents from high to low during the session. The USDA posted a yield of 168.8 bushels per acre with a production level of 13.686 billion bushels. The average yield trade guess was 164.5 bushels per acre and 13.327 billion bushels of production. The USDA may have been too aggressive with yield data in areas of the eastern Corn Belt. These larger than expected yields brought a bit of shockwave to the trade. The yield numbers may have been over-inflated due to stalk counts and plant population but no hard samples had been taken for this report. Demand for new crop corn was pegged at 13.775 billion bushels. Of that, ethanol is expected to consume 5.250 billion bushes; 50 million bushels more than the 2014-’15 year. The end result is new crop carryout was pegged at 1.713 billion bushels or a 12.4 percent carry-out to use ratio. This allowing enough carryout to make the market feel comfortable at this time. Traders will anxiously be waiting the September USDA report.

Outside influences will limit the upside for corn. China’s economy will weigh on the entire commodity and equity market place impacting soybeans, energy, etc. China’s change in their currency is seen weighing on commodities that they import. The U.S. dollar will impact these products as well. Brazil will be going to the fields optimistically planting a soybean crop, which will weigh on U.S. values.  The USDA needs to offer some hope for corn when they report their September yield and production. Will there be in a reduction in planted acres? That may not be seen until the October report. Therefore, upside potential may short-lived. Any upside may come in the form of the cash market if producers are reluctant to make sales this fall.

* Comments in this column are market commentary and are not to be construed as market advice.