Despite Small Changes, Volatility Inevitable as WASDE Released During the Trade
- Published on Tuesday, 12 June 2012 18:46
By Kevin M. Roepke, U.S. Grains Council Manager of International Operations
Commodity trading ushered in a new era this morning with the release of the World Agricultural Outlook Board's (WAOB) World Agricultural Supply and Demand Estimate, and simultaneous trading, as the CME Group's new 21 hour trading format was put to the test. In a scene cut straight out of John Landis's 1983 film Trading Places, starring Dan Aykroyd and Eddie Murphy, traders anxiously paused and awaited the news of world demand and weather implications on this year's crops.
However, for as much anticipation built into the report, the data contained within it could be interpreted as fairly melodramatic. Ending stocks for the 2011/2012 crop remain unchanged at 851 million bushels (21.6 million metric tons) due to an offsetting adjustment of 50 million bushels lower in exports and 50 million bushels higher for ethanol. New crop also remained unchanged as WOAB did not alter any category—including the yield, which much of the trade was speculating would be reduced from the 166.0 bushel per acre May estimate. Ending stocks remain pegged at 1.881 billion bushels—on the upper end of the trade range and higher than the average estimate of 1.75 billion bushels.
On a global scale, new crop corn production was raised 4.2 million tons (165.3 million bushels) as WOAB noted a 2 million ton (78.7 million bushels) increase from China (due to more corn plantings and less soybean plantings) and a 1.1 million ton (39.4 million bushel) increase in corn production from the EU-27—due mostly from an increase in area and yields in Hungary. Global corn trade is projected to increase, as imports were raised from the EU-27 and Indonesia, while exports were increased for Russia and Belarus. Global corn consumption was raised 2.4 million tons (94.5 million bushels). Nevertheless, global ending stocks were also raised 3.4 million tons (133.9 million bushels), as a 2 million ton (78.7 million bushel) increase for China and 1 million ton (39.4 million bushel) increase for Brazil were noted.
Many traders were concerned the new simultaneous trading and report releasing would add to an increase in volatility, as traders rush to reactions of individual sections of the report without full comprehension. Within the first 10 minutes of the report's release, July corn contract traded from 5.91, up to 5.97 (+1 percent), down to 5.77 (-2.3 percent), only to climb back to nearly unchanged—all-in-all, a 3 percent change in price within 10 minutes.