Technically Speaking
Darin Newsom DTN Senior Analyst

Monday 06/30/14

Cash Grains and Quarterly Reports

This past weekend, social media was abuzz with excitement over what was going to happen to grain markets (most notably corn and soybeans) once USDA released its Quarterly Stocks and Planted Acreage reports on Monday, June 30. Talk of limit moves (recently changed, by the way) ran rampant though nobody was quite sure if it would be up, down, or both up and down before the dust from the fallout had settled.

Source: DTN

Another set of arguments commonly heard around these reports is that they are "game changers". Taken in the context of the ongoing World Cup soccer tournament, does that mean the report is going to take a flop?

Anyway, a look at the seasonal tendencies (both the 5-year and 10-year) of the DTN National Indexes (national average cash prices) for the corn and soybeans markets shows us that the intrinsic value (cash value) of these key grains seems to shrug at the so-called importance of USDA's quarterly reports.

I've placed dashed lines at the weeks prior to the release of quarterly numbers. Notice that each of the four seasonal indexes (two for corn, two for soybeans) don't react that strongly to the reports, remaining in their current trends until turns are seen at a later date.

For example: After the release of the September 30 report the cash markets continue in seasonal downtrends through the first week of October. This tendency isn't surprising given that harvest is ongoing. The December numbers (released in January) find the markets comfortably in seasonal uptrends with little change seen in direction. Similarly, cash prices show little interest in the March quarterly report again continuing on with their seasonal uptrends. By June, the four seasonal indexes have become so jumbled it would be difficult to say the cash markets care at all about USDA's findings.

So what should we expected following the 2014 version of June quarterly reports? Both the DTN National Corn Index (NCI.X) and DTN National Soybean Index (NSI.X) are in solid downtrends at this time. However, where the indexes are priced are an interesting contrast. The NSI.X came was calculated Friday evening at $14.07, a price that puts it in the upper 23% of the 5-year distribution range. On the other hand, the NCI.X priced at $4.24 puts it in the lower 38%. Based on this factor, traders may view cash corn as the better potential buy sooner than they do cash soybeans.

To track my thoughts on the markets, follow me on Twitter: www.twitter.com\DarinNewsom


Commodity trading is very complicated and the risk of loss is substantial. The author does not engage in any commodity trading activity for his own account or for others. The information provided is general, and is NOT a substitute for your own independent business judgment or the advice of a registered Commodity Trading Adviser.

Posted at 8:32AM CDT 06/30/14 by Darin Newsom
Comments (4)
Darin is the social media still abuzz over the USDA- United States Dictatorship of Agriculture corrupt report that sent the grain "market" into a collapse. These "reports" they come up with are such a joke, who do they answer to, or who checks their numbers? What a sick situation farming has become helpless to a out of control corrupt government agency. Disaster is the only hope a farmer has to get a fair price for the food we produce.
Posted by DAVID/KEVIN GRUENHAGEN at 4:23PM CDT 06/30/14
The one thing that concerns me, and has for years, is the very premise of this report. As producers, we are required to certify planted acres. In Iowa anyway, and I assume many other states as well, that certification date that verifies planted acreage is June 30. So how does so much weight get placed on what can only be an estimate and extrapolation based on percentages? Now on top of that; the last two years, due to the extremely wet May/June months that we've had, those planted acre dates have been extended. When exactly do they start to use true numbers supplied by those of us that plant the crops?
Posted by Nathan Kitzinger at 10:34PM CDT 06/30/14
Good morning David and Kevin. Social media certainly was buzzing all Monday afternoon over the grain markets' reaction to USDA's June 30 reports. I wrote my view of the situation in an On the Market column/report review that will go up early Tuesday morning. As a reader of DTN, you know I am no fan of having these reports to begin with because of the unnecessary volatility tied to subjective numbers. I will say though that Monday's trade was nothing more than an extension of trends already in place. Again, thank you for your comments.
Posted by DARIN NEWSOM at 6:02AM CDT 07/01/14
Good morning Nathan. I agree completely with your concerns about the premise of the reports in general. As for when will actual acreage be accounted for, we need go back no further than 2013 when the argument was it never happened. DTN readers no I have railed against the process of releasing reports in any form, as they have outlived their intended purpose and usefulness. Thanks again for your comments and questions.
Posted by DARIN NEWSOM at 6:07AM CDT 07/01/14
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