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BARNES BROKERAGE CO., INC.
30 S. Wacker, Chicago, Illinois
(August 13, 1997) SOYBEANS: On Tuesday August 11, 1997, The USDA issued its first Crop report based on actual field surveys. The corn number came in at a shockingly low 9.276 billion bushel, putting it under last years production at 9.292 billion bushel. This is an amazing admission from a usually cheap- food minded USDA this early in the year. Even today, the 1st day after the report, skepticism began to surface about the number's validity with some saying benign weather could jump the production late in the crop year.
REFLECTIONS ON THE REPORT–1. Eastern Corn Belt–Suffered stress damage during June and July in Illinois and Indiana which was apparently under estimated by the trade.
2. China–Is the 2nd biggest producer of corn (after the U.S.) and the drought there has reduced crop estimates by 10%.
3. Lower U.S. Production–Our corn crop has gone from a potential record of plus 10 billion bushels to the current USDA estimate of 9.276, under last year.
4. Lower World Production–Our lower corn crop coupled with China's drought–ravaged crop has lowered world corn production to 572.1 MMT, down 19 MMT from last year.
5. Lower World Carry- Over–With lower production this year, corn carry out would drop from 55 days this August to about 44 days for next August.
6. “Mitigating Factor”–Field surveys for this report were conducted around August 1, before crucial rains hit both our corn belt and China's.
7. Beans Are Hard Read!–The projected 2.744 record crop's negative influence on November beans has been neutralized by a limit bid corn market (Tuesday) and a 34-cent higher August bean market today.
Some traders are still comatose, reeling from the market shock waves generated by 2 major market events, one very bearish, one very bullish occurring effectively within a 24-hour period. First was weekend rains sending beans limit-down on Monday–then came the USDA “corn-lowball” locking all options of corn limit-up on Tuesday! The end result is that we can't quite seem to shake that “nagging problem” of low carry-over stocks. This year, the beans were the problem; now it seems that next year (1998) corn will be the problem with stocks going down, not up is in the face of rising world demand.
With El Nino knocking on the door, and corn, beans and wheat all about $3.00 off their highs from the past year (corn $5.50, beans $9.00, wheat $7.50) current levels look like real good property. And don't forget about the possibility of Jack Frost paying an unwelcome visit this fall!
William D. Moore
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