No major adjustments are expected for the monthly USDA crop report, but expect a buying rally leading up to the release on Nov. 9.

LAST REPORTS

Flooding in the Midwest, droughts in the South led to sharp cuts in corn and bean production but surprisingly barely cutting ending stocks. As the government cut more production off the top, it equally cut usage. It cut feed use, even though the drought in the Southwest had ranchers fed record numbers of cattle a blend of corn and soy meal.

Monthly reports are to adjust the current 30-day supply usage and to keep us current and not get ahead of ourselves on suggestive assumptions. They also cut exports, even as hog and chicken populations soar worldwide to address the need for demand of meat protein.

DEMAND

China looks to import more than 300% more corn and feed grains this year. Every major country is expanding its ethanol program, which requires more corn. It's clear the government wanted to avoid the rampant price rationing that would have taken place had it just cut production. Ending stocks inventory would have been totally depleted for the first time in U.S. history. It doesn't solve the problem of world demand outstripping our ability to produce enough grain to meet it.

The government has a difficult time this month when trying to adjust lower demand and usage. The recent cattle on feed report showed 5% more cattle are feasting on grain.

The average weekly export sales reports have nearly doubled:

  • September - 833 t.m.t.
  • first three weeks of October - averaging 1.437 m.m.t.

Weekly bean reports:

  • September - 558 t.m.t. weekly
  • first three weeks of October - 655 t.m.t.

REPORTS' EFFECT ON PRICE

For now, cutting production and usage figures in the reports lowers cash grain prices. This helps cash end-users who would have suffered with price rationing:

  • livestock producers
  • food processors
  • exporters

The crop is clearly smaller than hoped, but the government shell game of production versus usage has calmed traders.

EXPECT RALLY

This report is set up to be a yawner. However, the market trades fear before  fact. The fear is the government may catch up to reality.

We have to expect a buying rally into the Nov. 9, report. Near-term support for December corn lies between 6.00 and 6.20. While November beans support lies at 11.75. Any dips into or near these prices should be bought and expect a prior report released rally.