The USDA has a bent toward “surprise reports” and their latest offering on Mar 31 the Acreage & Qtly Stocks – was no exception! While the trade was universally leaning bearish as evidenced by a 25 cent sell-off into the report, the actual #’s were a bullish shocker – 91.1 MA – 2MA under the estimate & even under the expected range (92-94.5)! The mkt’s next act was arguably even more surprising – as the day after, the mkt gave up more than half the report gains! The funds reasoned the report gains offered a perfect profit-taking opportunity – especially in front of a 3-day W/E! And some were skeptical the actual planting #’s would come in that low! But the S/D remains positive with tight stocks & uncertain US pltg
The Bean acres were equally surprising – coming in at 87.6MA – also 2MA under the estimate & under the expected range (88.9-91.3)! Both corn & beans wasted no time going up the allowable limit (25 cents in Corn & 70 cents in Beans)! The extreme reaction was totally due to the acreage #’s as the Qtly Stocks were in line estimates! The subsequent night session saw these limit gains extended even further before massive profit-taking by the funds ensued! So the focus is now shifting hemispheres from South American harvest to the US planting season! With carry-over pared to 6-7 year lows in Corn & Beans due to massive China demand & production issues in S/A, there is absolutely NO MARGIN FOR ERROR it’s not that it would be nice if we had an adequate crop in the US – it’s that we absolutely NEED one to replenish severely depleted stocks! So the mkt stands to move sideways to higher until much more is known about US yield & production! Further, if the low-ball acreage estimates hold, then we’ll need record yields -for sure! There is no weather premium!
May wht had broken $1.00 off its highs (695-595) – heading into the 3/31 acreage report – mostly based on adequate moisture in the Central Plains & record global ending stocks! And now the most recent Egyptian Tender disappointingly included Russian wheat when the trade thought tax issues had side-lined the Ruskies! So wht clearly continues to be the weak link at the CBOT! But rest assured, should corn & beans rally sharply this summer off the inevitable “weather scares”, wht will gladly jump on board!!
A changing of the guard in the meats occurred as Apl Cat – after being dormant for over 3 weeks – locked in a tight range – suddenly broke out upside and now is on pace to challenge the mid-Feb highs! Even today, the contract highlighted its ascent with a “gap higher & go” opening! Of course, the fundamentals behind this sudden upside move are easily understandable! The economic rebound spurred by stimulus checks, widespread vaccinations & massive restaurant re-openings – coupled with the strong barbeque season have demand surging at a torrid pace!
July Hog have been nothing short of a mkt juggernaut relentlessly marching $30 higher (77-107) since last November – fueled mostly by insatiable demand for our pork by China! Then came the US Economic Recovery – which featured a DJI reaching an historic high of over 33,000! Restaurant & food Services became more active, people started travelling again & attending sporting events! It all added up to enormous domestic demand on top of the prodigious China imports! So when the July Hog Contract key-reversed down a few days ago, naysayers were proclaiming a top – but alas the prediction was short-lived as the mkt scored new highs the last two days! Indeed, The BULL is alive & well!!