Huge grain supplies dampen impact of USDA reports

Source: By Mark Weinraub, Reuters • Posted: Friday, June 9, 2017

The U.S. Agriculture Department’s monthly crop reports, which have traditionally provided huge shocks to the market, have been met by a shrug in 2017, with price moves and volume muted by the massive supply of grains.

Price swings for corn , soybeans and wheat futures following the release of the government’s biggest agriculture reports, which provide a window into global demand as well as production, have fallen sharply this year.

The depressed volatility on what have typically been the most active trading days of the month is weighing on the bottom line of even the biggest traders such as Bunge Ltd and Archer Daniels Midland Co. The massive grain handlers, who use the futures market both to hedge their physical purchases as well as trade it for profits, have cited slow market action as one of the reasons for weakening profitability at their operations.

“If you are only moving … 5 cents off of those reports, you cannot expect to buy or sell the market and try and make 7 cents,” said Tom Burnham, trade strategist at INTL FCStone. “In general, traders prefer more volatility and more surprises.”

The price swings that come after the government’s monthly supply and demand reports, acreage estimates and quarterly stocks views are down 26.88 percent from 2016, according to an analysis of Reuters data. The daily moves on report days in 2017 are 45.83 percent below the average of the previous 10 years.

In 2017, corn, soybean and wheat futures have averaged just a 1.17 percent price move on major report days. That compares with an average move of 2.16 percent on report days during the previous 10 years. In 2016, the average move was 1.60 percent.

USDA will release its next supply and demand report on Friday at 12 p.m. EDT (1600 GMT).


Bumper crops around the world have muted the impact of the monthly reports from the government, which used to frequently spark limit moves within minutes of their release time.

“The surprises are not big enough to move the markets a long way,” said Randy Fortenbery, professor and chair of small grains economics at Washington State University. “The bigger the stocks are, the bigger surprise it takes to move the market in one direction or another.”

In the past, post-report rallies provided an opportunity for farmers to lock in prices that would guarantee they booked a profit for crops they had yet to seed or grains that they had been holding in storage.

So far this year, U.S. farmers who have been keeping massive crops in storage bins have seen the biggest rally following a report top out at 7-1/2 cents for corn and 25 cents for soybeans. The daily limits are 25 cents and 70 cents, respectively.

The small moves have been keeping some traders away from the futures market altogether.

On the day the USDA released its May supply and demand report, which gives the government’s first estimate of new-crop usage and production, the volume for the most-active soybean contract was only 29.8 percent above the average for the whole month of May. A year earlier, soybean volume on the day of the May report was 90.9 percent above the May average.

For wheat, volume for the most-active contract was 15.0 percent above the monthly average, compared with 26.9 percent higher in 2016. Corn volume was 45.0 percent higher than the May average, comparable to 46.5 percent in 2016.

(Reporting by Mark Weinraub; Editing by Lisa Shumaker)