From a marketing standpoint, USDA's just-published annual crop production summary for 2008 may appear to be a sign of bearish times, but at least one senior market analyst, Darin Newsom with DTN, still holds out some hope for a bull market.
"I'm not ready, particularly when it comes to (soy)beans, to concede the bear market yet," he says. "There is this idea that we're moving into a shorter-term bull market -- not like we saw in 2006, '07 and '08, but a 'Reader's Digest' version -- in 2009. So I still think we have the hopes for a bullish market in soybeans in 2009, and that could spill over into corn."
Bear facts
The increase in U.S. ending stocks of soybeans is the surprise of this year's report, according to Newsom. Pre-report predictions set the amount at an average of 185 million bushels, and previous projections at 205 million bushels.
"So for USDA to come in and say we've got 225 million bushels projected for 2008 to 2009, despite the pace our exports were on, was a bit of a surprise to the market," he says.
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It appears that, at least initially, the reported numbers are having a limited impact on the market.
"I think, now that we sit back, it's not quite as bearish as the market reacted to" Jan. 12, with 70 cents down, Newsom says. "It's still a relatively neutral number."
The pace of exports may be a deciding factor as time goes on, he says, especially "when you factor in the South American weather problems possibly cutting into Brazilian and Argentine production, which could keep our exports stronger, longer than they normally are."
Corn demand
The other number that jumps off the report pages for Newsom is the reduction in domestic corn demand from all three major categories; feed, exports and ethanol.
The Jan. 12 "report was not a surprise, but I think it was a confirmation of what we knew going into the report," he says. "It gave traders a more bearish outlook and, with the ideas coming off the floor, that we can see continued reductions in ethanol demand for corn as we go through this marketing year."
He anticipates the number possibly getting down to about 3.2 billion bushels, well below the previously anticipated 4 billion bushels. That would not bode well for the ethanol industry.
That still would be a small increase in demand, he says.
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"If we start dropping back below that 3 billion-bushel mark, or just slightly above 3 billion bushels, then that would really be bearish and show that we have more problems than we acknowledge, right now, when it comes to the ethanol industry," he says.
Weather-proofing
The weather year has been one of the more challenging in recent years, with heavy winter snows leading to late planting, which in turn has led to floods in the early spring and summer. Some parts of the Northern Plains have seen drought or near-drought conditions and others have been hit by late-fall rains, just in time to impede, if not outright halt, harvest.
But Newsom suggests that perhaps the market is learning to take a wait-and-see attitude toward the results of weather events. What used to be "weather scares" may now be less scary to the market.
"Particularly in corn, because we threw just about everything we could at the corn market, and still, we came in with the second-highest national average yield on record," he says.
He admits that some say the weather briefly "turned perfect" at just the right time, but he still thinks that science may be neutering weather, to a certain degree, and the markets may be starting to trust it.
"We are making things drought resistant, flood resistant and resistant to just about anything weather can throw at it so that, in the end, it still yields," he says.
Case in point: The 1997 winter wheat market.
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"We had that Easter freeze that moved through and supposedly killed the winter wheat from the Dakotas all the way down into Texas, yet we had record production that year," he says. "Since then, the winter wheat market has been very slow in reacting to weather developments."
He thinks corn now may be heading that way. At the very least, it should be interesting to watch.
"That will be one of the interesting things, when it comes to weather in 2009 . . . if indeed the market is going to sit back and say, 'The weather has to prove that damage has been done, now, before we're really going to buy into this thing.'"
