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Grain Hedge: USDA Reports Once Again Shock the Market

15 January 2012

US - The final revisions to the USDA Supply/Demand and Crop Production reports sent the commodity markets sharply lower Thursday.

The Dow continues its rally to start the year and is up 111.10 to close at 12,471.02 today. Oil has fallen off by $2.99 a barrel to end trade Thursday at $98.94. The dollar index has sold off sharply this week while gold has rallied $33.60 an ounce finishing at $1,651 today. Agricultural commodities took it on the chin due to unfavorable revisions in production.

Corn was the leader to the downside today and was down the maximum daily limit of 40 cents for most of the session.

Traders and producers were looking for revisions lower for production. What they received, however, was a surprise increase in yield, harvested acres, production and higher than expected quarterly stocks. This led to the sharp sell off Thursday and for the week corn is down 32 cents to settle at $6.11 ½ today. Export sales were decent at 321,500 MT, which is up over 7 per cent from last week.

Soybeans sold off sharply as well, down 20 ½ cents on the day and 14 cents for the week settling at $11.82 ½. As with corn, soybean production, yields, ending stocks, and quarterly stocks were bumped higher resulting in the sell off.

At one point in the session, the oilseed was down over 50 cents, but rebounded throughout the day. South American production was lowered lending a little support.

Export sales were better this week at 433,900 MT, which is up 54 per cent from last week. Wheat followed the other grains lower and were pressured by larger than expected winter plantings.

World ending stocks were revised higher to the 2nd largest amount ever, confirming the ample supplies that have pressured the market since this season's harvest. Export sales were higher at 365,200 MT, which is up 164 per cent over last week.

The USDA shocked traders and producers Thursday by revising corn, soybean and wheat productions and carry outs higher. This sent the agriculture markets sharply lower, especially corn, which was down the exchange imposed daily limit of 40 cents. Little fundamental news will be reported until the March Planting Intentions report, so focus will turn back to South American weather

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