The Hightower Report

SOYBEANS

The USDA reports were considered bullish for soybeans with the market called cents 5-10 cents higher on the opening. The USDA pegged soybean production at 3.06 billion bushels from 3.085 billion last month and trade expectations near 3.095 billion. Average yield came in at just 41.5 bushels per acre from 41.8 last month and trade expectations near 42. Ending stocks for the 2011/12 season came in at just 160 million bushels as compared with trade expectations at near 185 million and 165 million as last months estimate. World ending stocks for the 2011/12 season came in at 63.01 million tonnes as compared with 62.55 million last month and the increase came from an adjustment higher in the 2010/11 ending stocks to a record high 69.26 million tonnes.

PRICE OUTLOOK: Declining US and world ending stocks and a smaller than expected US crop plus active buying from China yesterday and rumors that China will be re-stocking reserves should keep the short-term trend up. Look for more up with 1282 1/4 and 1318 3/4 as next upside targets for January soybeans.

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CORN

The USDA report this morning was considered slightly negative against trade expectations with the market called 3-5 cents higher on the opening due to positive soybean news. Production came in at 12.433 billion bushels as compared with 12.497 billion bushels last month and this was about 60 million bushels below trade expectations. However, exports were revised lower so the USDA ending stocks forecast is now at 866 million bushels which is about 60 million above trade expectations and compares with 672 million last month. Harvested acres were revised down by 500,000 which was right in line with expectations and yield was unchanged at 148.1. World ending stocks were adjusted higher to 123.19 million tonnes from 117.39 million last month and 114.53 two months ago. Last year was 129.76.

PRICE OUTLOOK: Given the limit-up surge yesterday and a positive tilt to the soybean data, the market may see some follow-through higher on China buying rumors but December corn resistance should emerge near 675. A lower close today could suggest a set-back to 624 if outside forces turn sour.

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WHEAT

The USDA Supply/Demand report this morning was considered bearish for wheat with the market called slightly lower. US wheat ending stocks were pegged at 837 million bushels as compared with 761 million bushels last month and 671 million two months ago. Traders were looking for ending stocks near 735 million. The USDA lowered wheat feeding to 160 million from 240 million bushels last month and also lowered exports by 50 million bushels. For the world report, 2011/12 ending stocks were pegged at 202.4 million tonnes from 194.6 million last month. Demand numbers were far worse than expected with wheat feeding down in the US and down near 5 million tonnes for the world. World production was revised up by 3 million tonnes.

PRICE OUTLOOK: The jump in US and world ending stocks was not anticipated and the market looks to work lower over the near-term with support for December wheat emerging at 622 3/4 and 608.

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Below is The Hightower Report’s summary of the most recent USDA Quarterly Grain Stocks report.  This report is available with your subscription to our Daily Commentary. Sign up for a Free Trail.

Full Report: USDA Quarterly Grains Stocks Review – 2011.09.31

CORN

The USDA report this morning was considered bearish with the market called to open down 15-20 cents lower. September 1st corn stocks were pegged at 1.128 billion bushels, which was 164 million bushels above trade expectations and outside of the wide range of estimates.

This is the beginning stocks for the 2011/12 season and if we plug in the new number to the supply/demand report and leave all of the other numbers unchanged, ending stocks are adjusted to 836 million bushels from 672 million posted in the September supply/demand report.

PRICE OUTLOOK: A resumption of the downtrend for December corn leaves 616 and 603 1/4 as next support levels.

SOYBEANS

The USDA reports this morning were considered slightly supportive for the soybean market but a bearish number for corn has caused an opening call of 15-20 cents lower. The USDA pegged September 1st stocks at 214.7 million bushels which was about 10 million bushels below trade expectations. This is the beginning stocks for the 2011/12 season and will tighten the outlook somewhat for the coming season; depending on the October 12th production update.

PRICE OUTLOOK: A resumption of the recent downtrend due to bearish news for the corn market leaves 1187 as next downside target for November soybeans.

WHEAT

The USDA wheat production report this morning was considered positive to the wheat market but this was more than offset by bearish news for wheat stocks and corn stocks and the market is called 5-10 cents lower on the opening. Traders were looking for spring wheat production near 493 million bushels but the report came in at 462.5 million bushels which is supportive. As a result, all wheat production is pegged at 2.008 billion bushels which is 36 million below trade expectations and down from 2.077 billion as the last USDA estimate. However, September 1st stocks came in at 2.15 billion bushels which was 115 million bushels above trade expectations. The report suggests that wheat feeding was not as high as expected.

PRICE OUTLOOK: A resumption of the recent downtrend leaves 606 3/4 as next target for December wheat.

SOYBEANS

The USDA reports this morning were considered bearish old crop and bullish new crop with the market called 20-25 cents lower on the opening. The USDA pegged June 1st stocks at 619.08 million bushels which is about 23 million bushels above trade expectations. This may result in a similar revision higher of about 25 million bushels for the ending stocks for the 2010/11 season and will ease tightness concerns for late in the year. Soybean planted acreage was pegged at 75.2 million acres as compared with trade expectations at near 76.5 million. If we plug in the new plantings estimate and adjust beginning stocks higher by 25 million bushels and use a trendline yield of 43.4 bu/acre, ending stocks for the 2011/12 season come in at just 155 million bushels with a stocks/usage of 4.7%. This is relatively tight and suggests the need for a high yield.

PRICE OUTLOOK: A resumption of the recent downtrend due to bearish news for the corn market leaves 1274 3/4 as a longer-term objective with some closer-in support at 1309 3/4 for November soybeans.

CORN

The USDA reports this morning were considered bearish with the market called to open down the 30 cent limit. June 1st corn stocks were pegged at 3.67 billion bushels, which was about 370 million bushels above trade expectations and well above the range of estimates. This shows that the market has seen significant rationing of demand and will help ease old crop tightness. The USDA also pegged US corn planted acres at 92.282 million acres this year, up from trade expectations near 90.76 million acres. If we assume 900 million bushel beginning stocks instead of 730 in the last supply/demand update and use the new planted acreage estimates and the 158.7 trend yield, ending stocks come in near 865 million bushels which is up from 695 last month.

PRICE OUTLOOK: The stocks number confirms a slower demand pace due to high prices and suggests that the market has already seen enough price rationing for the old crop season. The higher than expected planted area plus higher beginning stocks should make it easier to avoid ending stock tightness for the 2011/12 season. A resumption of the recent downtrend leaves 600 1/2 as downside target with some close-in support at 629 3/4.

WHEAT

The USDA reports this morning are considered negative for wheat with the market called 15-20 lower. Traders were looking for spring wheat plantings to come in near 13.35 million acres but the report showed 13.627 million as compared with 14.427 as the March estimate. The USDA June 1st stocks report is also the ending stocks estimate for the 2010/11 season for the wheat market. Traders were looking for stocks to come in near 825 million bushels but the report came in at 860.78 million compared with 973 million last year and 809 million posted in last months supply/demand update.

PRICE OUTLOOK: A resumption of the recent downtrend leaves 620 3/4 as next target for September wheat.

SOYBEANS

The USDA reports this morning were considered supportive with the market called 35-45 cents higher on the opening. The USDA pegged March 1st stocks at 1.249 billion bushels which is about 46 million bushels below trade expectations. This is significant as ending stocks are pegged at just 140 million in the last USDA supply/demand report. The range of estimates was from 1.265 to 1.365 billion so the news is quite bullish. March 1st stocks last year totaled 1.27 billion bushels. Soybean planted acreage was pegged at 76.609 million acres as compared with trade expectations at near 76.9 million acres. The range of estimates was 75.0-78.5 million. Last year there were 77.4 million acres planted, and the USDA Outlook Forum last month put the estimate at 78 million. If we plug in the new plantings estimate and use a trendline yield of 43.4 bu/acre, ending stocks for the 2011/12 season come in at just 105 million bushels with a stocks/usage of 3.2% and a record low. An ending stocks level this low would be considered unacceptably low, and we would expect prices to move higher to discourage consumption and to attract some additional acres.

PRICE OUTLOOK: Look for a resumption of the uptrend and a quick run to at least 1465 for November soybeans.

CORN

The USDA reports this morning were considered bullish with the market called 15-30 cents higher on the opening. March 1st corn stocks were pegged at 6.523 billion bushels, which was about 165 million bushels below trade expectations and below the low end of trade guesses. This is extremely bullish for the July corn and suggests that the USDA estimates for the current crop year, which result in an ending stocks/usage ratio at a record low of 5%, are on track or maybe even a bit too high. The average estimate for stocks was around 6.690 billion bushels with a wide range of 6.552 billion to 6.880 billion. The USDA also indicated that producers plan to plant 92.178 million acres this year, up from trade expectations near 91.8 million acres, 88.19 million last year and 92 million from the USDA Outlook Forum last month. Estimates were in a tight range of 91.0-92.6.

PRICE OUTLOOK: The stocks number confirms an extremely tight situation for old crop and a potentially tight situation for new crop, with a “need” for nearly perfect weather to avoid a two-year bull trend. A resumption of the uptrend is likely with 794 1/2 as next upside objective for July corn and 652 3/4 as next upside objective for December corn. If we plug in the new planted acreage estimate and assume a yield of 162.3 vs. 152.8 last year, ending stocks for the coming season are 932 million bushels with a stocks/usage of 6.9%, the third tightest in history.

WHEAT

The USDA reports this morning are considered negative for wheat but the market is called 10-20 higher due to bullish news for the other grains. Traders were looking for spring wheat plantings to come in near 13.7 million acres, virtually unchanged from last year but the USDA came in at 14.4 million acres. The higher spring wheat number pushed total wheat plantings for this year to 58.0 million acres as compared with trade expectations at 57.2 million, up from 53.6 million last year. March 1st wheat stocks came in at 1.425 billion bushels which was higher than trade expectations near 1.4 billion bushels but was in the range of estimates of 1.275 billion to 1.488 billion. Last year March 1st stocks were 1.356 billion

PRICE OUTLOOK: Wheat news was bearish for the reports but the market looks to follow the other grain markets higher over the near-term and the focus of attention will quickly shift to the poor condition of the winter wheat crop and the weather difficulties in the north for getting the spring wheat crop planted. July wheat may be in a position to follow the other grains higher, with upside objectives of 820 3/4 and 851 1/2.