The bull has been yoked but the bears are running more freely after last week’s United States Department of Agriculture report threw open the zoo gate.
But few expect any of the animals to run far.
“People think this is subject to revision,” said Tony Tryhuk, the manager of trading for RBC Investments in Winnipeg.
“They’re looking for the next USDA report.”
The USDA’s Aug. 12 report found fewer soybeans but more corn and wheat than analysts had expected.
Initially, the soybean futures price shot up, but a bull market was not unleashed. Larger than expected corn and wheat crops pushed prices down.
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Tryhuk said the soybean number surprised many traders, but they reacted by questioning the number rather than trading on it.
Many think the USDA will move soybean production back up once crops are looked at again.
“The yields in Iowa were a surprise that people weren’t expecting and I wouldn’t be surprised if in the next report, those numbers are revisited,” said Tryhuk.
“If you asked around, you’d find the average yields (of the Iowa crop forecast by traders) would be 39.6 (bushels per acre) or 39.7, not 39.2 (which is what USDA estimated.) That makes a difference.”
Oat market analyst Randy Strychar of Ag Commodity Research said he thinks the bearish effect of the corn production number will be restrained by traders thinking about consumption.
“When you look at the ending stocks and the demand side, it’s not bearish,” said Strychar.
Until harvest is mostly completed, the market is likely to be overly focused on production numbers, Strychar said, but the overall feed grains market looks better than what today’s prices make it seem.
“The supply side stares you right in the face because you’re watching the reports and the weather. People will react far more to supply numbers than anything on demand,” said Strychar.
“They’ll ignore stocks and demand until the crop is in the bin, then they’ll quickly shift to demand.”
