Agricultural Commodities: Following Yesterday's USDA WASDE Report, Bleh

Corn got a boost on the report but we're seeing little follow-through:

While wheat, which got no pop yesterday is doing a little levitation:

Both charts from FinViz (on blogroll at right)

From Agrimoney:

AM markets: corn rally fades, amid doubts at 'bullish' data

So was the Wasde bullish for corn prices or not?

The grain proved the biggest winner of Chicago's big three in the last session, after the US Department of Agriculture, in first estimates for 2017-18 as revealed in its benchmark Wasde crop report, pegged US and world stocks below market expectations.

Indeed, the immediate market reaction from many observers was upbeat.

"Bullish" was how Rabobank, for instance, termed the data, adding that the report would "put extra focus on the potential for additional downward revisions if US planting continues to be delayed".

At Texas A&M University, flagged that in the Wasde's 2017-18 estimates "not only is US production forecast to drop 1bn bushels, foreign production is down 155m - this as total corn use is up 8.7m tonnes (343m bushels)".

"Lower production and higher use cuts the days of use on hand at the end of the marketing year from a 78-day supply in 2016-17 to a 67-day supply, the lowest since 2013-14."

The "days of use" reading, another way of presenting the stocks-to-use metric, is a key indicator of price potential, in showing the extent to which buyers may be forced to pay up for supplies.

Degrees of comfort

But many other commentators had more nuanced views.

Wasde corn data, change on current estimate and (on market forecast) US stocks, end 2016-17: 2.295bn bushels, -25m bushels, (-31m bushels) US stocks, end 2017-18: 2.110bn bushels, n/a, (-12m bushels) World stocks, end 2016-17: 223.9m tonnes, +920,000 tonnes, (+580,000 tonnes) World stocks, end 2017-18: 195.27m tonnes, n/a, (-124.45m tonnes) Sources: USDA, Reuters, Agrimoney.com

At Commonwealth Bank of Australia, Tobin Gorey termed the data "ostensibly bullish" for corn, flagging, as Agrimoney.com reported, that they showed a an end to a four-year spell of rising stocks.

"The global feed grain market is exiting a phase that started in season 2013… the season when the feed grain market started the process of catching up with demand. and so more than halved corn prices from their 8$ highs in 2012," Mr Gorey said.

Next season "looks likely to be different at least in terms of direction," a factor which means "it is now more likely we have seen the lows in corn prices for a while.

"We do not though expect a big, sustained rise in prices. There is still a lot of corn around now.

"While supply is likely to be less comfortable, it is likely to remain comfortable."

'False hope for bulls'

At RJ O'Brien, Richard Feltes, cautioned over the dependence of the weak world stocks number on an accelerating drawdown in Chinese inventories (as reported elsewhere on Agrimoney.com).

The "20m-tonne decline in 2017-18 Chinese corn stocks is a false hope for bulls," he said.

"Major shifts in internal Chinese grain stocks do not have a material impact on global grain trade."

What was of "more immediate importance is the improving US weather pattern, especially warmer temperatures, that signals improved prospects for planting/emergence in coming days" in the US Midwest.

Data later

There was "nothing" in the Wasde "to jar large corn shorts", Mr Feltes added, although in price terms the "recent low end of range will hold until US planting is nearly complete"....MUCH MORE

Here's the Department of Agriculture's WASDE page.