USDA Brings out the Bear

May reports bearish

The USDA May crop reports were released Friday in the middle of the day and the bearish numbers sent corn, soybean, and wheat futures prices tumbling, but not as sharply as some previous reports. Analyst and broker Jim Riley at Riley Trading said there isn’t always much that changes in the May report so he gave USDA credit for making adjustments even though the market didn’t like the overall tone.

“Part of the credit I’ll give them is they dropped the yield on corn down to a 158 bpa, so they’re headed in the right direction. At the same time they gained a bunch of acres. We’re going to plant more acres of corn now if we ever get it planted, and less acres of beans.”

Bob Utterback at Utterback Marketing Services said the report was a confirmation of what was expected but just a bit worse with no reductions in the corn crops in the U.S., South America and China. That lack of tightening in the supply side puts downward pressure on the market.

“And the burden of proof has now been squarely put on the back of the bull to prove that corn acres will not be planted, prove that the yield will not be there, and I think that there are still going to be opportunities for that bull to basically resurface, but in the short term we’re going to have long liquidation, margin call liquidation, and it will take some tones off the weather this week, but I would say we probably will have a pretty good short term low in before Memorial Day weekend.”

There are a couple of timelines where there could be a rally in the corn market.

“The rallies will be toward the pollination time period in July and then early frost. So the bull has a rough road ahead of him now in corn, beans and wheat.”

Both analysts agree the weather will now dictate the market and Utterback expects after the long liquidation in the coming days active buying in the June time period.