Early Call On Chicago

12/01/12 -- The overnight grains closed higher in anticipation of a bullish USDA report. It wasn't very friendly at all however.

US ending stocks came in higher than expected for wheat, corn and soybeans. US 2011 production of corn and soybeans was raised and yields were also increased - by 0.5bpa in the case of corn when a 0.5bpa drop was expected.

To top off the whole little lot US wheat plantings for the coming harvest were pegged a million acres higher than anticipated.

On a world scale global 2011/12 wheat ending stocks were raised to 210 MMT, within 0.4 MMT of being the highest ever recorded. World corn ending stocks were increased by 0.9 MMT to 128.1 MMT, although for soybeans they were reduced by 1.1 MMT to 63.4 MMT.

Wheat production in 2011 was raised slightly for Russia to 56.23 MMT and by 1.5 MMT for Kazakhstan to 22.5 MMT.

For corn they dropped Argy production by 3 MMT to 26 MMT and left Brazil's unchanged at 61 MMT. Both of those are still a record! Argentina's export prospects were trimmed from 20 MMT to 18.5 MMT. Ukraine corn production for 2011 was raised by 1.5 MMT to 22.5 MMT.

For soybeans Argentina's crop was dropped only 1.5 MMT to 50.5 MMT, with Brazil's cut 1 MMT to 74 MMT. Argentina's exports were cut by 1 MMT, but Brazil's increased by 0.5 MMT. China's imports were held steady at 56.5 MT.

In other news the USDA's weekly export sales for came in at 365,200 MT for wheat in 2011/12 plus a further 73,000 MT for 2012/12. Corn sales were 321,500 MT for 2011/12 and negative 23,000 MT for 2012/13. Soybean sales were 433,900 MT, all for 2011/12. Expectations on all three were for sales of 350-600,000 MT.

Catching the eye for wheat was weekly shipments of just 196,200 MT - a paltry amount and the lowest since the first week of the marketing year 31 weeks ago. Needless to say that is well below the 465,000 MT level now needed to reach the USDA's export target of 25 MMT, which was inexplicably revised upwards from 24.5 MMT today.

On top of all that news the USDA also announced the sale of 414,000 MT of soybeans to unknown.

All in all we have a very bearish set of numbers for wheat and corn, and maybe modestly less so for soybeans.

March corn closed at USD6.51 1/2 last night and has subsequently been trading around 30-35 cents lower than that in over the counter trading since these numbers came out.

We now need to wait and see if we get a wholesale capitulation this afternoon or if consumers and our old buddies the funds decide that this is a buying opportunity.

Early calls are all over the place from limit down to 15-20c lower on corn. Limit down to 15-20c lower on wheat and from 5-15c to 20-30c lower on beans. I'd expect corn to open 30-35c down in line with synthetic trade, with wheat down around 30c and beans 20-25c weaker.