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Bull Turns Bear on USDA Quarterly Stocks

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Bull turns bear

The Hoosier Ag Today headline prior to Thursday’s USDA quarterly stocks report was Market Expecting Bullish Report. In the words of analyst Arlan Suderman the market was caught leaning the wrong way and a sharp futures market selloff followed shortly after the release.

“I was not at all surprised,” he told HAT. “I expected that we could very easily see a limit move in corn today but it was hard telling in which direction. There was just such a strong pull between both the bulls and the bears in their position and what they expected, and I felt like if we were outside of the trading range in either direction it would produce a limit move. And we certainly got that.”

Suderman is Senior Market Analyst at Water Street Solutions. With stocks in corn and soybeans higher than expectations, the bullishness now turns to bearishness, and maybe for some time to come.

“The data would suggest that domestic usage is at a much slower pace than what had been suggested by the past 2 quarterly stocks reports. So that caught the trade leaning the wrong direction. They need to correct that, but it also sets more of a bearish tone for the quarters ahead suggesting that demand has already been over rationed. We’ve rationed it too hard and we need to actually encourage some demand.”

Suderman said if the market is successful at that, prices can rebound. Or prices can continue to slide.

Corn second quarter ending stocks were reported at 5.4 billion vs. the average trade guess of 5 billion. Soybean ending stocks at 999 million bushels were well above the 950 million average for estimates. Wheat stocks came in about 70 million below the trade estimates. The number from USDA is 1.23 billion bushels.

Suderman says the prospective plantings report held no real surprises, “other than maybe soybeans came in a million to a million acres less than what the trade anticipated. I think we’ve seen a lot of signs over the past month that producers in southern areas as well as northwestern areas and even among many of our clients in the central Midwest, they’re talking about shifting 30 or 40 acres here and 30 or 40 acres there from corn back towards soybeans. That was not picked up in this report which was as of March the 1st. Perhaps it will be in the June report, but overall no major trend changes.”

More from Suderman:Arlan Suderman March 28 analysis