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September 2020 USDA Supply & Demand

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September 2020 USDA: USDA cuts U.S. crops

Today the USDA cut U.S. corn and bean production estimates by almost the exact amount of the pre-report forecasts. Normally when prices have risen ahead of USDA reports, it takes more bullish numbers than the average to keep prices moving higher, but not today.

We think prices are moving higher due to the demand side of the equation, not supply. Larger Chinese demand than was expected has come to the marketplace in a rush and caught traditional users with small inventories.

In addition, the strong technical uptrend of crop markets has brought in large speculative buying during the past month.

The rally has been blunted from day to day from farmer sales as desired prices were reached. But that has slowed as farmers began to reach for higher levels on the next sale.

Although prices are moving due to demand, in our opinion, the USDA actually cut domestic corn consumption by 200 million and boosted exports by only 100 million bushels from last month.

In beans and wheat, consumption was left nearly unchanged in all categories. The USDA believes it has adjusted the forecast to compensate for the Chinese demand they expect. That is not nearly as exciting as today’s trade.

But if all that demand comes to the market at once…remember what happened to toilet paper.

The only thing we know for sure is we don’t want to have an inventory of toilet paper when the buyers have enough.

 

 

 

 

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These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. This commentary is written as a daily marketing tool to help farmers sell the grain they raise. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. Past performance and testimonials are not necessarily indicative of future results. Commodity trading involves the risk of loss, and you should fully understand those risks before trading.