Any hopes that the United States Department of Agriculture stocks and world production report this morning would blow the crop markets out of the doldrums have been dashed by the generally expected conclusions.
USDA’s WASDE forecast for corn was unsurprising in reducing Argentine production by three million tonnes, but raised a few eyebrows by not increasing U.S. expected corn ending stocks. That’s good for corn, but not a huge deal. U.S. expected soybean ending stocks have declined from a January estimate of 225 million bushels to 210 million bushels, which is not a surprise, and Argentina’s soybean production has been cut by about 10 percent. This isn’t good news for soybeans, because the market expected larger reductions. Wheat ending stocks were left untouched, but rains in both the southern U.S. wheat belt and in China’s northern plains sent the market lower.
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But overall, the report wasn’t a big deal and has done nothing to give us a sense of market direction. Since the beginning of 2009 for soybeans and wheat, and since late December for corn, the futures markets for these three main North American crops have been flat, with corn showing a slight downward bias. A lot of folks have been hoping that this is just a breather after a rather dramatic rally since early December has taken most crops up by more than 20 percent. That’s a typical occurrence – a consolidation of prices after a big move that’s the beginning of a trend.
But were the December lows the lows? Was the following rally the beginning of a trend? Is this really a consolidation and a continuation pattern, or could it be a “rounded top” or the beginning of some other reversal pattern?Â
Today’s report doesn’t do anything to answer those questions and reveal whether farmers will be handed better selling opportunities in the run-up to seeding season. There’s good reason to hope for another leg-up in the this market, even though that would conflict with the usual seasonal tendencies in some crops, but for now that hope’s going to have to linger on until some trigger is pulled that forces the market to fire in the direction it’s planning to go but is so far keeping secret.
