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Home / Futures Blog / Turner’s Take Weekly: May WASDE Preview

Turner’s Take Weekly: May WASDE Preview

May 9, 2016 by Craig Turner

Tomorrow’s WASDE at 11 am central is one of the more significant USDA reports of the year. The May WASDE is notable because it is the first time the USDA publishes their supply and demand tables for new crop corn and soybeans.   That means we get to see what the USDA thinks the ending stocks will be for new crop corn and beans.  The big number to watch is Soybeans.  Here are a few quick notes

  • US Ending Stocks 2015/16 (old crop) – Soybeans are going to be interesting. Did the recent issues in South America bring demand back to the US. The range for old crop ending stocks is 395 to 445 million bushels. We were at 445 last month and most think we will be lower. The big question is how much the US added to their export sales due to South American production losses and logistical issues. If we are below 400mm tomorrow that is going to be bullish and we could go another leg higher.   If we are still at 445 or higher this market could go down fast. The market has been pricing in lower stocks and for $10 soybeans to hold we need to see reductions to ending stocks
  • US Ending Stocks 2016-2017 (new crop) – This could be the big one. The fact that the average analyst range is 290 to 500 million bushels means we could have some serious volatility if the USDA says one thing, and the market is positioned looking for another. If we are sub 300 then I think we go to $11 in Nov Soybeans. If we are sub 400 I think we continue to hang around $10. If we are closer to 450 0r 500 I think we can really go lower.
  • Global Ending Stocks 2015-2016 – Again this is about Soybeans and it will be interesting to see how much the USDA takes it down.   This will be primarily driven by how much production has been lost in South America.
  • South American Crop Production – This goes hand in hand with Global Ending Stocks. The revisions downward in SA crop production will ultimately lead to lower Global stocks.

I think the soybean market is already overvalued. If old crop and new crop are over 400mm bushels then I find it hard to justify $10.00 soybeans and would expect a 30 to 60 cent sell off. If we are in the mid to high 300s then maybe these prices are justified. If for some reason the USDA feels the need to shock the market and come in at the lower end of stocks estimates, we could see some fireworks to the upside.

In my opinion, the USDA is slow to make major revisions. They would rather come down gradually in the production numbers than make a drastic move lower. I think we see old crop and new crop around 400 and the market sells soybeans because the bullish ending stock story has not materialized. In the end it is an educated guess. Considering that the funds are now long soybeans, a bearish surprise may have more room to run lower (due to funds liquidating long liquidation) than a bullish surprise (because the spec funds are already long).

US Ending Stocks 2015/16

May # Average Trade Est. Trade Range USDA April
Corn ??? 1.841 1.762 – 1.890 1.862
Soybeans ??? 0.426 0.395 – 0.445 0.445
Wheat ??? 0.981 0.961 – 1.011 0.976

U.S. Ending Stocks 2016/17

May # Average Trade Est. Trade Range USDA April
Corn ??? 2.294 1.950 – 2.555 NA
Soybeans ??? 0.405 0.290 – 0.500 NA
Wheat ??? 0.997 0.820 – 1.140 NA

Global Ending Stocks 2015/16

May # Average Trade Est. Trade Range USDA April
Corn ??? 205.75 200.50 – 209.00 208.91
Soybeans ??? 76.28 71.50 – 78.32 79.02
Wheat ??? 239.77 238.30 – 241.20 239.26

U.S. Wheat Production

May # Average Trade Est. Trade Range 2015/16 Prod.
All Winter ??? 1.384 1.220 – 1.572 1.370
Hard Red Winter ??? 0.818 0.678 – 0.978 0.827
SoftRed Winter ??? 0.364 0.340 – 0.399 0.359
White Winter ??? 0.200 0.180 – 0.223 0.184
All Wheat ??? 1.981 1.825 – 2.219 2.052

South America Crop Production 2015/16

May # Average Trade Est. Trade Range USDA April
Argentine Corn ??? 27.64 27.00 – 28.50 28.00
Argentine Soybeans ??? 55.73 53.00 – 58.00 59.00
Brazilian Corn ??? 80.46 78.00 – 83.00 84.00
Brazilian Soybeans ??? 99.42 98.50 – 101.50 100.00

 

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TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

Filed Under: Turner's Take

About Craig Turner

Craig Turner is a Senior Broker at Daniels Trading, author of Turner’s Take newsletter, and a Contributing Editor for Grain Analyst. Craig is often quoted in the Wall Street Journal, Reuters, Dow Jones Newswire, Corn & Soybean Digest, and also makes appearances on SiriusXM – Rural Radio Channel 80 providing commentary for the Grain and Livestock markets. Craig has also been featured in FutureSource’s Fast Break series, Futures Magazine Online, and INO.com. Mr. Turner has a Bachelors from the Rensselaer Polytechnic Institute (RPI) where he graduated with honors and has worked at the NYSE and Goldman Sachs. While at Goldman, Craig earned his MBA in the NYU Stern executive program. Learn more about Craig Turner.

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Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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