Is Another USDA Surprise On The Cards Thursday?

08/10/12 -- The overnight markets are mostly lower, with beans leading the way around 10-12 cents easier and with corn down 5-6 cents or so. Wheat is attempting to buck the trend, but only marginally achieving it, up a half to down one cent.

The trade is waiting on Thursday's upcoming USDA supply & demand report. A Reuters survey sees US 2012/13 corn ending stocks falling to a 17 year low of 648 million bushels. The same survey sees 2012 corn production falling to 10.6 billion bushels versus 10.727 billion from the USDA last month.

The gist of the reasoning seems to be a reduction in harvested area due to higher than normal abandonment due to this year's drought. Whilst unharvested acres will almost certainly be higher than the USDA currently project, it is far from certain that they will commit this month with the harvest still ongoing. It should also be considered that there is every possibility that they will at some point increase their planted area estimate too.

The Farm Service Agency helpfully come up with an estimate of 97.2 million US corn acres last month, a new 75 year high and over 750 million higher than the number currently in use by the USDA.

On top of that possibility, we also have the potential for the USDA to lower domestic usage by virtue of falling demand from the ethanol sector. Last week's ethanol grind was down 3% from the previous week and 8.5% lower than that week a year ago.

In addition to that, US corn exports are hardly flying are they? Year-to-date sales are 410 million bushels, which compares to 673 million last year, a reduction of more than a third.

With the option of increasing planted area, and cutting domestic usage and exports there's a fair bit of ammunition there for Washington to draw on to spring another (this time bearish) corn surprise on Thursday. And that's before we even consider the option of a yield increase. Informa said 127 bpa on Friday, and last month's 126.6bpa estimate from the FSA proved that the frequently optimistic former aren't entirely a lone voice in the wilderness. The USDA went 122.8bpa last month, just as a reminder.

In other news, weekend rainfall was near expectations Down Under. "Showers favoured southeastern New South Wales and Victoria. Amounts were 0.25 to 1.5”, with 10% coverage, say MDA CropCast.

There may even be a small window of opportunity for parched Western Australia, where they say that the 6-10 day outlook is wetter.

Russia may produce more rapeseed than Ukraine this year, with the Ag Ministry forecasting output at 1.15 MMT, marginally ahead of Agritel's recent estimate for production of 1.1 MMT in neighbouring Ukraine. Russia are also expecting a crop of 1.7 MMT of soybeans and 7.0 MMT of sunseed - the latter a sharp reduction on the 9.6 MMT produced last year.