Final report 2016 crop

Ray Grabanski Special to the Farm Forum
Farm Forum

01/10/17 — January is finally here, which means the final January USDA report will be out Jan. 12 which is the last estimate of the 2016 crop size, including corn and soybean revised yields for the U.S. This is the final look at the record shattering 2016 crop and its excellent yields, and then finally we can look forward to the next year and what it will bring, including the SAM crop the next few months as well as the U.S. crop size (acres and yields) next summer and fall.

It might be a good thing to finally put 2016 to rest, as it produced record large yields of wheat, corn, and soybeans in the U.S. Stocks are quite a bit higher, and so therefore prices are quite cheap as well. Expectations are for yield increases in corn and soybeans (big crops get bigger), but there are also expectations of a cut in corn acreage harvested as well that might offset the yield hike. Overall, if production grows, most expect ending stocks to grow as well.

Grains are within striking distance of the old lows in corn (around $3.30 March futures) and soybeans (below $9.60 March beans). Of course, in a carry market weekly charts made lower lows than the Jan and March contracts, and we may be unlikely to see those numbers filled from this report. But the above targets are within reach. At Pro Ag, we’d recommend covering all short positions and taking the downside risk from there as we feel it’s unlikely prices will go much lower.

Of course, the South American crop is yet to be determined, and so far weather has been good in that whenever a dry spot develops for a few weeks, then it turns wet there and solves that problem. So it’s likely that the SAM crop is going to be a good one, if not great.

Wheat seems to be a different animal, with prices pushing higher recently and finding some strength after forming a double bottom on Chicago March futures. Could the bottom finally be in the wheat market? Concerns about dryness in U.S. HRW wheat country is rising as Oklahoma seems to be the epicenter of a dry period that has recently developed. Crop ratings of Oklahoma and surrounding states recently nosedived, making the market take notice. Winter wheat planted acreage is also expected to be about 2 million acres smaller in the Jan report. After the report, will it be time to buy wheat?

On the negative side, weekly export sales last week were very poor, showing that the strong demand from the export side of the market can slow down. That is discouraging bulls as prior to that export sales and shipments were outstanding. But can they be front end loaded, and slow down later in the year?

Many questions to ask about this year and the markets, which have basically been treading water in grains for the past 4-5 months. Perhaps the January USDA report will answer some of these questions, not just the numbers themselves, but how the market reacts to these numbers as well. As sometimes the more important market factor is the reaction to either a bearish or bullish report, not the report itself. It seems that traders are positioning themselves for a relatively neutral report this time, so what the numbers are and how we react to them might be a clue as to how the market will trade from January through March 30, when we start focusing on 2017 U.S. acreage and the U.S. upcoming crop.