ICE weekly outlook: Not much faith in USDA’s WASDE

ICE November 2019 canola with 20-, 50- and 100-day moving averages. (Barchart)

MarketsFarm — For one trader, the monthly world agriculture supply and demand estimates (WASDE) from the U.S. Department of Agriculture (USDA), aren’t something he spends a lot of time dealing with.

“I don’t put a lot of faith in them,” said David Derwin of PI Financial in Winnipeg.

This month’s WASDE could be something toward which many in the commodities market might take the same attitude toward. It’s widely expected the report will adhere to the data from USDA’s acreage and grain stocks reports issued near the end of June.

Those reports, especially the former, contained what many believed to be skewed numbers — in particular, not fully accounting for U.S. farmers having switched planting intentions from corn to soybeans.

USDA has undertaken a re-survey, but the results, initially expected this month, won’t be available until August.

The question thus remains how the markets will react Thursday.

Derwin said June’s acreage and grain stocks reports had a strong bearish effect on the markets, eradicating a price rally. He also noted there often has been a peak in prices at the end of June and the beginning of July.

Canola and other grains are in something of a holding pattern waiting for USDA’s report. Canola doesn’t have much to go on either way, he said, and if a rally were to occur, “$25 might be all you could squeeze out of the basis.”

The weather won’t be much of a factor anymore, he added.

Dry conditions across the Prairies generated a weather premium this year. However, much-needed precipitation across parts of the region won’t see the weather push canola prices back up in a substantial way.

“That idea has come and gone,” Derwin said.

Glen Hallick writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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