Post USDA: "So where do we go from here?"

Possibly more than any other plantings report in memory the 2008 intentions report released a short while ago was expected to be a signal indicator for the grain trade.

The markets have been obsessing over the “battle of acres” in the United States — the world’s top grain exporter — given record high grain prices over the past year fueled by world crop shortages, exploding biofuels production and soaring export demand, all driving food inflation.

So today’s report will likely light some more fireworks, especially after the big sell-off in Chicago Board of Trade markets on Friday as traders seemed unwilling to hold long positions going into the report. As if the grain market needs more fireworks given the unprecedented rallies and volatility seen in Q1 2008, the last day of the quarter should make sure the grain trade closes their March 31 books with a bang.

When the dust settles after the report, the grain market will settle into the more usual uncertainty offered by its traditional most influential player: Mother Nature. If the Midwest stays cool and wet in April, there’s always the possibility for some intended corn acres getting switched to soybeans, a later planted crop. If, of course, US farmers can actually procure the seed.

I pointed out on this blog last week that there has been a strong trend over the last few years for the USDA to up it's final acreage figure for corn by around 1.5m acres between it's March & it's June report. Whether that will happen this year is anybody's guess.

So for now, we are expecting beans well down this afternoon (Mar 1st stocks were also higher than expected) and corn substantially higher (Mar 1st stocks were lower than expected). How long these two can move in opposite directions is also anybodys guess. They have already been posturing this way during the last few weeks with corn closing steady 5-6c higher on Friday despite beans dropping 50-60c.

Wheat is also an interesting conundrum all of it's own. The acreage & stocks figures here were also a little higher than anticipated and it too is called modestly lower this afternoon. However, unlike beans & corn, for wheat the Americas aren't the only shops in town.

The European market doesn't seem to like today's figures too much, French milling wheat futures which were bumbling along slightly lower pre-USDA have dropped sharply EUR11.25 lower as I type. London feed wheat is down around £3-4. Rapeseed futures too have suddenly plunged EUR16.

I expect to see wheat end much lower tonight than the 5-10c lower currently being touted around. Soybeans are likely to flirt with limit down at some point, and quite likely to end there I'd guess unless corn can generate some spillover strength.

Some early reports are suggesting corn could hit limit up. Corn limit up, soybeans limit down in the same session, not sure if we've ever seen that before. Tonight could be the night.