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Cutting through the details: My thoughts on Monday's USDA data dump

Cutting through the details: My thoughts on Monday's USDA data dump

As you know, I hate the typical analyst double-talk, rather preferring to cut through some of the mundane details and  get straight to the point. Hope you respect the simplicity and ease of the read. I could have listed all specific details and in-deepth thoughts regarding Dec 1 stocks, exports, feed usage, ethanol, crush, yields, harvested acres, etc... but why? Below are my all encompassing thoughts and how I will be playing the markets come  Monday:    

Corn - I think the market is extremely uncertain about a variety of balance sheet items  (i.e. final yield, harvested acres, feed usage, exports, etc...) and may see a large knee-jerk reaction off the release of the USDA's estimates. The problem is, I don't believe the trade will have what it takes to hold or follow through with an extreme move in either direction. In other words if the data is immediately digested as extremely bullish (+$0.25 to +$0.30 cent rally), I will look to be a seller. If it's digested as extremely bearish (-$0.25 to -$0.30 cent break) I will look to be a buyer. I simply believe corn seems somewhat comfortable in this range between $3.80 and $4.20. Ethanol margins are taking a hit, but DDGs are being bid at a strong premium. The US hog and poultry industries are trying to rapidly expand, but on the flip side, US exports demand can be questioned. I just believe there is some strong bullish and bearish balance in the more highly debated and important topics. This should continue to provide some some type of stability.   

Soybeans - Opposite of corn, I believe this market is more poised to post an extended breakout in one direction or the other. In other words I would be extremely hesitant in fading the initial knee-jerk reaction of the trade. Sure we might see some wild intraday swings on Monday, but I bet in the end this market heads towards it's first hunch. I'm just afraid the USDA numbers could be a game changer and set this market into a more long-term price trend. The only real concern I have is that we may see South American weather come into play a couple more times during the next few weeks. As we have come to learn the past several years, South American and or U.S. weather headlines, especially during their respective growing seasons, trump ALL other suits. If the USDA surprises the trade with a bullish report and South American weather remains "questionable" the next two-weeks, I wouldn't rule out an $11.00 price tag. On the flip side an unexpected overly bearish report by the USDA, followed by an all-clear signal regarding South American weather, and we may soon retest the lows set back in early October at around $9.20.

Moral of the story, don't overthink this market and do not get overly convicted to your preconceived ideas or thoughts. We used to always say trading was NOT a team sport. In the case of "high protein" and today's algo, quant, and HFT world, jumping on the team bandwagon and going more with the flow has paid the largest dividends. Remember, it's not about trying to prove how smart you are. And there's certainly no style or difficulty points award for your efforts. This is simply about reducing your risk and turning a profit. The easier you can accomplish this goal the better your going to be.          

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TAGS: Soybeans Corn
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