October 11, 2008

 

CBOT corn and soy seen bearish

 
 

The USDA's October crop production and supply and demand reports are bearish for CBOT corn and soy futures, floor traders said Friday.

 

The data reinforce a bearish tone from a free-fall in global financial markets, traders said. Stocks around the world tumbled on frozen credit markets and a lack of faith in the financial system.

 

CBOT corn futures are called to open 25-30 cents per bushel lower, while soy are seen starting 45-50 cents lower. Wheat is expected to open 20-25 cents lower, traders said.

 

"I don't see anything really friendly," a CBOT floor analyst said after reviewing the USDA data. "Plus, the outside markets are getting killed."

 

Corn 
 

The USDA estimated corn production at 12.2 billion bushels, compared to the agency's September estimate of 12.072 billion and the average trade estimate of 12.076 billion. Yield was pegged at 154 bushels per acre, up from the USDA's September estimate of 152.3 bushels, which was also the average trade estimate.

 

The market is getting hit with a "double blow" thanks to the sharp losses in global financial markets and the USDA's reports, said Vic Lespinasse, a grain analyst. CBOT corn could potentially drop its exchange-imposed daily 30-cent limit after the December contract sank 24 3/4 cents overnight, floor traders said.

 

Corn carryout was estimated at 1.154 billion bushels, up from the USDA's September estimate of 1.018 billion. The average trade estimate was 1.138 billion.

 

Soy

 

The USDA pegged 2008-09 soy production at 2.983 billion bushels, up from the agency's September estimate of 2.934 billion and above the average trade estimate of 2.920 billion. Yield was seen at 39.5 bushels per acre, down from the USDA's September estimate of 40 bushels and below the average trade estimate of 39.9 bushels.

 

CBOT soy were sharply lower overnight following a late sell-off in the US stock market and overnight losses in global markets. November soy overnight dropped 46 cents.

 

"In conjunction with the collapse in the stock market, there is no reason buy on the open," said Jack Scoville, grain analyst with the Price Group. "Looking ahead, there is room for the USDA's production estimates to come down, particularly on soy, where early harvest results are reporting less than stellar yields. Otherwise, the report will be overshadowed by outside markets, but the numbers should aid the lower tone."

 

The UDSA put 2008-09 soy carryout at 220 million bushels, up from its September estimate of 135 million and above the average trade estimate of 188 million.

 

Wheat
 

The USDA estimated 2008-09 wheat carryout at 601 million bushels, compared to the agency's September estimate of 574 million. The average of analysts' pre-report estimates was 552 million, as many expected strong exports and feed use to result in lower stocks.

 

The increase in wheat ending stocks is "pretty bearish," said Mike Zuzolo, analyst for Risk Management Commodities.

 

Overall, though, the report was "nothing new" for the market because traders already know the world has a lot of wheat to go around, a CBOT trader said. The market should focus on activity in CBOT corn and soy and on outside markets, he said.

 

The USDA pegged Australia's crop at 21.5 million tons, down from the agency's September estimate of 22 million. Argentina's crop was seen at 12 million, compared to the USDA's September estimate of 12.5 million.

 

The decreases seem to mirror traders' thoughts that Southern Hemisphere crops have been getting smaller, a trader said.
   

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