Positioning Agriculture Ahead of WASDE

 | Dec 11, 2012 | 7:00 AM EST
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The World Agricultural Supply and Demand Estimates report provides USDA's comprehensive forecasts of supply and demand for major U.S. and global crops and U.S. livestock. The report gathers information from a number of statistical reports published by USDA and other government agencies, and provides a framework for additional USDA reports. 

Find below a table put together by RCM's Grain Specialist Doug Bergman. USDA numbers will be released Tuesday morning 8:30 a.m. We expect to follow up with another report after the numbers to give you our assessment.

Going into the report, let's briefly touch on where we currently are in grains: Corn has been in a 50 cent trading range for the last three months while wheat has been in a sideways market contained within a 75 cent range for six months.

In recent dealings both markets have been on the defensive likely pricing in a slightly bearish number. Swing traders should be looking for long entries with prices near the bottom of the latest trading ranges.

As for soybeans after a 20% reduction in prices since the beginning of September, beans have started to move appreciating $1/bushel in the last three weeks. We are mildly bullish as long as prices stay supported by the down sloping trend line penetrated last week.

Last week's COT report showed managed funds adding to longs in corn, essentially flat soybeans, and sellers of wheat. Today's report is not expected to show major changes in U.S. balance sheets, but much focus will be given to South American estimates. 

Shifting to South America, dry areas in Brazil are shrinking after recent rains, and more rains are seen over the next two weeks. Argentina is receiving some much needed dry weather.  We expect there to be switching of corn to soybeans due to the continued wet conditions.

USDA 2012 December wheat corn soybean numbers

Understand traders' expectations have already been priced in so a bearish/bullish number may not move the market but rather how the actual number compares to expectations.

Light long exposure in any of the Ags we think is acceptable going into the report. We've advised some traders to be hedged with options if in a large open futures position to allow some flexibility in case of a surprise. 

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