Ag Commodities: Ahead of Monday's Big USDA Reports, One Number to Watch

The scheduled reports:

	Mon 03/31/2014
		12:00 PM	Grain Stocks	NASS
		12:00 PM	Rice Stocks	NASS
		12:00 PM	Prospective Plantings	NASS
		3:00 PM	Egg Products	NASS
		4:00 PM	Oil Crops Yearbook	ERS

And, via Agrimoney:

One number key to negotiating big day for USDA crop reports

There is good news and bad news for grain and oilseed investors preparing for what, on Monday, may well prove one of the most momentous days of the year.

The good news is that, out of the all the important data that the US Department of Agriculture will release in a double bill of big reports – one on prospective crop areas this year in the US this year and the other on quarterly grain inventories – there is one that really stands out as important.

Bill Tierney, chief economist at Chicago-based AgResource, says: "You have got old crop information and information and new crop information coming at the same time.

"But what prices seem to respond to is the stocks report, and in particular for what is going on in corn.

"Even for soybeans, what appears to have more impact on prices than soybean data is what is happening in corn, which seems to be driving price response."

So investors attempting to position ahead of the report need only look at the US corn balance sheet to guide their strategy.

Price behaviour

And correct positioning is important. Quarterly stocks reports have a habit of producing big price swings.

Forecasts for US corn data, March 31 USDA reports, (change on last year) 2014 sowings: 92.748m acres, (95.365m acres) Range of estimates: 90.50m-94.0m acres March 1 stocks: 7.099bn bushels, (5.40bn bushels) Range of estimates: 6.861bn-7.540bn bushels Sources: USDA, ThomsonReuters

At the last one, on January 10, corn prices soared 5.0% on the day as the data signalled that livestock feeders had switched to the grain from wheat, encouraged by discounts of more than $2 a bushel, to a far greater degree than investors had expected.

Soybeans actually managed that time to gain only 0.5%. (Wheat tumbled 2.6% in Chicago.)

A year ago, the row crops did perform in line, undertaking a synchronised dive, with the March stocks report sending corn down 5.4% and soybeans plunging 3.4%. Wheat tumbled 6.7%.

A year before that, in March 2012, the contracts bounced in harmony, with corn futures soaring 6.6%, soybeans 3.5% and wheat 7.9%.

Big range

The bad news is that, as can be inferred from the extent of the price moves after the reports, guessing the corn stocks figure right is a tricky business....MORE