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.
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.
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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.