First glance would have one thinking, “hmmm, this is bearish!” However, the market in the last few days had already factored in the “not bullish” report to a fair degree and, as such had less room in which to tumble. End of season stocks are nowhere near as comfortable as we would like, indeed our discussion with colleagues in the USA tonight has left us distinctly uncomfortable in terms of adequacy of corn and soybean stocks and certainly we do not feel flush with wheat levels either. The question remains as to when rationing will kick in to extend stocks sufficiently to last until the next harvest, which needs to be a good one to allow for some degree of stock replenishment.
Buried in the detail of the report are elements which seem downright incongruous, soybean pod weight being one. The figure used is an average which feels wrong in such a drought stressed year. We would expect output to drop significantly if and when the USDA revises this particular element of the report next month.
Additionally, there are areas of the report where we are not in agreement with the USDA and believe there will be some significant adjustment in the October report. Examples include corn harvested acreage and Australian wheat output to name but two.
Having said all that, it would be overly arrogant to denounce the report as wrong; it is just that we believe there are a number of holes which seem all too evident. It feels like the USDA has “dressed up the house to sell it”, so, “caveat emptor!”