Wittal: USDA reports bulldoze markets

Jan. 12 –– All outside markets are down today, most likely in response to the U.S. Department of Agriculture’s reports and the hard sell-off in U.S. grain futures. 

The U.S. dollar index fell nine-100ths of a cent today, while gold closed down $21.80 at $1,128.90. The Canadian dollar dropped 0.44 cents to close at US96.36 cents.

The Dow Jones March contract closed down 44 points at 10,555 today.

In the energy sector, crude oil closed down $1.73 at US$80.79 per barrel.

Corn today closed lock-limit down, 30 cents a bushel. Beans closed down 25.2-32.4 cents a bushel.

Wheat markets closed down 29-38.6 cents a bushel today; Minneapolis March futures closed down 37.2 cents a bushel.

Canola closed down $4.70-$4.90 per tonne today. 

Western barley closed up 70 cents per tonne at $156.20. 

The USDA report came out like a bull in a china shop and ran over the markets with yields and production estimates higher than anyone expected. Reduced usage and large inventories only added to the frustration.

Markets did the only thing they could do, which was to drop — and drop they did. Computer-generated sell and stop-loss orders were also triggered as the markets fell, which added more fuel to the fire and continued the slide.

It will take some time for complete analysis of all the info that came out in the reports today, and there will be revisions (no doubt) due to the fact that there are some unharvested crops still out in the U.S.

The big concern is how to increase sales and usage of these grains in order to reduce the large volumes of carryout stocks going forward. Answer: Drop the price until someone buys! And that’s what the markets started to do today.

Question is, how low will prices have to go to increase consumption to reduce inventories?

Reports over the past several months have alluded to large yields, slowing demand and improved growing conditions around the world, leading us to this inevitable conclusion that many were hoping wouldn’t happen. But now the reality of the situation is before us and needs to be dealt with.

Yes, the majority of old crop should have been sold before now, and some new crop as well.

What to do now? Let the markets take their pound of flesh and wait to see what kind of a recovery will happen in the short term, instead of panicking and selling in the downfall.

That’s all for today. — Brian

— Brian Wittal has spent over 27 years in the grain industry, including as an elevator manager and producer services representative for Alberta Wheat Pool, a regional sales manager for AgPro Grain and farm business representative for the Canadian Wheat Board, where he helped design some of the new pricing programs. He also operates his own company providing marketing and risk management advice for Prairie grain producers. Brian’s daily commentaries focus on how domestic and world market conditions affect you directly as grain producers.

Brian welcomes feedback and information on market conditions in your area, such as current offering prices, basis levels, trucking premiums and special crops contracts. Contact Brian today.

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