The USDA releases its planted acreage estimates on Tuesday, June 30th. This report typically sets the tone for the coming marketing year. David Hightower’s analysis has been posted to our site and we defer to him in terms of the fundamental supply and demand numbers. We’ll pick the individual markets apart through the actions of the commercial traders, the actual producers or end line users of these grain markets. Given the depressed levels many of the grain markets have been experiencing can this report actually do further damage?
The soybean forecasts this year should set another global production record. This comes on the heels of last year’s record harvest which has left many of the domestic bins full. Obviously, supplies have pushed this market justifiably lower since last year’s domestic harvest numbers were confirmed. This leaves soybeans in the same condition as many of physical commodity markets; facing a supply overhang in a world of declining demand. However, those of you looking for a contrarian point of view may want to look at the substantial actions being taken by the commercial traders who are rapidly approaching their record net long position from last fall.
The Commitment of Traders reports showed that commercial corn producers sold more than 350,000 contracts equal to 1,750,000,000 bushels or, about 12% of this year’s crop as estimated by the October 10th USDA WASDE report between February and April. The average price for these forward hedges was around $5.00 per bushel. The summer’s perfect weather has led to record production and this has caused the market to sell off all the way down to $3.20 per bushel. This sell off has brought out the consumption side of the commercial trader equation and our math suggests that they’re just getting warmed up as you can see on the chart below.