Today’s USDA report hammered down crop prices across the board, knocking them well off their recent rally.
At about noon, Chicago soybeans had dropped 54 cents to $9.83 per bushel, corn had dropped 30 cents to $3.80 per bushel and Minneapolis hard red spring wheat had dropped 50 cents to $6.00 per bushel. That’s big. Big, big, big.
The cause was the USDA’s findings that ending stocks of corn, soybeans and wheat are all substantially higher than almost everyone expected. There are an extra 300 million bushels of corn, 40 million bushels of soybeans and 55 million bushels of wheat to get rid of this year, USDA found.Â
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The extent of the blow to market confidence that the report caused can be seen in how the prices fell. Before the market opened Allendale Inc. expected corn to fall 5 to 15 cents, soybeans 15 to 25 cents and wheat 5 to 15 cents. Once the market opened, prices fell about double that amount.
Until today, crop prices have been rallying fairly consistently. There have been a handful of down days, but there’s been a remarkably consistent rising action since the early December lows. In part that’s been a result of supply fears caused by weather problems in South America, and in part because the overwhelming impact of the equity markets has been whelming in a less overly manner.
However, news of big extra stocks like this punctured the confidence of the bulls like “a bucket of cold water,” Allendale said. People were getting used to the feeling of being bullish about crops again, but bad news like this can quickly bring back all the negative feelings that have been dominating the markets since summer.
The good news for farmers is that this kind of news tends to knock the market a bit, then it moves on and gets back to trading on weather concerns. Argentina is still dry and that nation’s soybeans don’t have much of a chance for rain for seven to 10 days, which is a long time for a struggling crop. This stocks news means that everyone has to adjust down their estimation of crops’ potential to fall short of needs, but certainly doesn’t derail the overall impression among many analysts that crop stocks are still pretty tight, and anything bad that happens in a big way could send prices sharply higher.
But for now, a down day or two is in order. As Allendale said this morning: “It’s a very negative bias here this morning.”
