THE GRAIN REPORT: Weather and USDA 29/09/2009

CORN:  The first report of the week came on the demand side with our Weekly Export Inspection Report showing 29.5 million bushels of corn was inspected for a near term export.  This was off slightly from a strong 40.9 the week prior and under our 4 week average of 37 m.b.  Last week's number of 40.9 was Asia loading up ahead of their major eight day holiday starting on Thursday.  It is no surprise we are slowing on demand as the holiday enters but demand will turn strong again after the holiday as they play catch up.  China's corn crop looks to be down 10 to 15% at a time they look to continue building a larger strategic corn supply, so expect them to be in at harvest time- along with Asian neighbors finding it difficult to get grain from big brother China.  Additionally, Mexico's drought and crop problems on corn look to continue while Argentina (the world's second largest world exporter) will plant 10 year low acres in favor of more beans.  This leaves Brazil to look at U.S. Ports for corn on its massive cattle feed lots as normally it would come from Argentina.  Do not be fooled... on the weekly reports as they always have soft spots.  Demand is certain to be better in the new marketing year all the way through late Spring as countries in need out of Asia continue to expand hog and chicken populating and gather larger reserves to protect their livestock base.  The Crop Condition Report on Monday showed 68% of the crop in good to excellent condition, unchanged from the week prior.  It was over a year ago of 61% and our 10 year average.  This is what has led the last several government crop reports to raise production estimates.  Not so fast...  A closer look shows only 37% of the crop is fully mature vs. 49 last year and our five year average of 72%.  Some of our key producers are even slower.  Illinois 24%, Indiana 31%, Nebraska 33% Ohio 24% and Wisconsin 20% mature.  We can look at this a lot of different ways, but the Market sees fear before fact.  The fear maybe that the colder weather patterns the last two weeks, especially the cold evenings may have corn shutting down.  If the crop is done growing or not, reaching full maturity and development, then lower production estimates may show up on the October USDA or November Crop Report.  We will watch near term to see if the Market begins to grasp this thinking.  Wednesday at 7:30a central time, the USDA releases it's Small Grains Report.  The average pre-report trade guess for our quarterly grain stocks is 1.719 b.b. up from 1.624 a year ago.  The range of guesses is 1.665 to 1.803.  If it is under the low estimate it is friendly for prices as it's amply stocks but over the high end is Bearish.  Unless there is a surprise on the report, we should expect weather to continue to be the major pricing influence.  The long awaited cold snap is here today and Wednesday.  The weather site WXRISK.COM said low 30's were seen as far south as Nebraska including North and South Dakota with minimal frost exposure.  Now Wednesday morning the frost threat is for Northern Minnesota and Wisconsin.  Again- largely out of the major growing areas.  Should the frost push deeper into Northern Iowa, Illinois and Indiana, we would have a problem and a measurable rally on prices.  After Wednesday we look to see a fair amount of rain in the Upper Plains and Western Corn Belt with generally cool to cold conditions the next eleven days.  A lot of stuff is working the Market now between weather threats and Wednesday Grain Stocks Report.  If frost damage should occur on Wednesday the pre-harvest lows are in at 3.02, but should we dodge a bullet and yield talks resume good and Wednesday's Report is Bearish, we have a chance for another leg down to test lows and possible pull under 3.00 basis December Futures.  Last October saw corn break 1.50 after the September 30^th Grain Report.  We were much higher then at 5.00 but trend following funds know the seasonal.  A close under 3.18 on the week sets up 2.94 as next support.  A close over 3.56 sets a test of 3.76.