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Surprises Possible Friday with USDA Stocks Report

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January report preview

Arlan suderman 2USDA reports on grain stocks and crop production this Friday and the trade is now positioning itself for the 12 noon (Eastern) January reports. Analyst Arlan Suderman with Water Street Solutions says the first reports of the year are historically full of surprises, in part because the agency is releasing so much information.

“Five of the last seven January reports have produced daily limit moves in corn, both up and down. I don’t expect that this time around because if we were to get a bearish report, well the trade is already leaning heavily to the bearish side with large short positions. If we were to get a bullish report, like suddenly USDA says that stocks are about 300 million or 400 million less than what we think, that still leaves us with a surplus of about 1.4 to 1.5 billion bushels. So it’s not like we’re suddenly running out of corn.”

While he doesn’t see limit moves for the markets there is still a good possibility for “excitement,” as Suderman calls it.

“Particularly in soybeans,” he told HAT. “Now wheat could also get a big move because the funds are leaning heavily short there, so if we’d get a friendly stocks report showing we had fed a lot more wheat than what we thought or something line, that would tighten up things particularly with the winter kill that we believe is out there in the 2014 crop and wheat could get a move. But soybeans is where things are the tightest. Let me warn that the surprises could be either bullish or bearish. Surprises are most likely to be in the stocks report, if there are any.”

But those figures are very hard to predict, and chalk that up to USDA.

“When you look at USDA’s tendencies for surprises in the stocks reports, they tend to be illogical, and so the best thing to do is make sure you’re protected against the risk that you can’t afford to take.”

Suderman says look for plenty of volatility in the two hours leading up to the Friday report release.