The Grains Review For the Week of February 27, 2012

[pitgurufk]

Special Recap: An Excerpt from Matt's Premium Daily Wire from Friday featuring analysis of the USDA Numbers.

The trade is digesting USDA numbers as they come out with the acreage released before the opening offering wheat a reason to move lower. 58 million acres will only add to burdensome stocks domestically and internationally. This does not explain the WH-K spread moving to a 3-inverse during parts of the day. My only theory here is blow outs by late entrenched bear spreaders coupled to logistical problems backing up what appears to be a real strong basis to unattractive levels.... Beans were supported by relatively small acreage as compared with corn and wheat but a lack of front end business could cap the rally into the weekend. Improved weather outlooks for Brazil also capped the front end spread pull so be aware of spread movements today for better direction into the close. I continue to feel beans more than any other is a pit ready to roll over. This market is bloated with fresh length hoping for an explosion that the 70 MMT Brazilian crop should easily counter.

The afternoon period brought further numbers from the USDA with Ethanol the glaring figure. A ceiling has been reached concerning domestic demand so new crop corn usage fell by 50 million bushels to 4.95 billion. This is not unexpected and adds to the mild bearish undertone of the trade heading into the overnight session. The overnight was not dramatic with a mild downside tone in spite of strong crude markets. Beans closed in the upper half of the range, corn and wheat near lows while products were mixed. Meal was supported while bean oil was lower on profit taking.

Looking at the day session markets first have to digest the USDA conference balance sheets. Corn yields set at 164 bu/acre is quite hopeful I think. Harvest acreage at 87 million produces a whopping 14.27 billion!!! Ending stocks with only minor shifts to demand are estimated at 1.616 billion bushels. This is a staggering number in my eyes based solely on the huge yield estimates. If we yield 146 production is only 12.70 billion, if we meet 2010 numbers production is 13.14 billion. This is by far the largest yield expectations traders will see on the year so I say do not get overly bearish after seeing it. Estimating ending stocks right now is very similar to picking the national champion in your NCAA basketball bracket. Yes, someone hits it but it