Traders on the Minneapolis Grain Exchange and Chicago Mercantile Exchange were looking for more bullish news in USDA’s monthly World Agricultural Supply and Demand Estimates.
They didn’t get it, according to Helen Pound, an analyst with Penson GHCO. Pound, guest commentator on the Minneapolis Grain Exchange’s monthly Crop Report Conference Call, said the numbers may prove to be a downer for the wheat markets.
“I thought it was a shocker. This market needed a bullish report, but I don’t think you really got one,” she said, referring to the adage that a bull market needs fresh, bullish news almost on a daily basis to keep prices moving higher.
She said USDA reported ending stocks of wheat at 902 million bushels or 25 million more than the average of traders’ pre-report guesses. World wheat production was forecast at 643 million metric tons or 2 million metric tons higher than the average of traders’ estimates. One “respected” trading house had placed the total at 639 million metric tons.
“World ending stocks were increased to 177 million metric tons from last month’s 174 million metric tons,” she noted. “Obviously, a big chunk of those stocks are in India and China and may not be freely available to the market. If you take those out, I think you the carryover to use ratio is still 13 percent to 14 percent, but, in general, the world has a lot of wheat.”
She said market reaction could vary from what the numbers indicate to her. “This market has been reacting to every little squiggle in the charts. One day, something will happen, and we’ll be up 30 cents per bushel. The next day, something else happens, and we’re down 30. We’ve been in a trading range of 70 cents just in the last few weeks. In the past, that would have represented the trading range for the entire year.”