THURSDAY THOUGHTS.............. Monday's crop condition report continued to show a declining corn crop. Corn's condition was put at 60% good to excellent condition down 2% from the week prior, 11% under a year ago and our lowest rating of the year. Key producers Illinois, Ohio, Missouri and Iowa declined for the fourth consecutive week. Beans came in at 61% good to excellent condition, up 1% from the week prior and 5% under a year ago. Key producers declining were Illinois down 1, Missouri down 3 , Iowa down 1 and Ohio and Nebraska rose 3% offsetting the other declines. A small increase on the week came as smaller producers improve like Mississippi up 2 percent and Michigan up 6. It was a shell game shuffling among states. 51% of the crop is in the pod setting stage so half the key yield development time still lies ahead. We should be fully pod set by August 20. Traders are not concerned about beans poor rating yet as good weather could make it back. But, they look to Thursday's crop report for direction on this year's crop. The report will be a starting point for beans pricing all depending on concerns over ending stocks tightness. Spring wheat condition came in at 66% good to excellent versus 70 the week prior and 82 year ago. Big losses were in Washington down 13%, North Dakota down 6 and South Dakota down 5. North Dakota at 72% good to excellent has to be 10 to 15% too high in. Harvest has begun at 6% complete. If the weekly reports seem not accurate, harvest yields can't lie. I suspect yields will unveil a much smaller crops than condition reports show, along with corn. But crop conditions and weather concerns are on hold until after Thursday's big USDA monthly crop report at 7:30 AM central time is released. This report is coming in with a lot of doubt as to what it may unveil. The industry believes that corn is in real trouble on yields due to a too wet spring planting season and the fourth hottest July in history as corn went through it's key pollination stage. But the trade also believes the USDA is behind on its crop condition surveys and may not give a accurate yield estimates on corn and that it may take until September or even harvest results on the October report for the true story. This cautiousness showed up on the pre-report trade survey of brokerage houses and analysts. The average estimate for corn production is 13.083 billion bushels versus last months report of 13.470. Only a 387 m.b. reduction. Soybean estimate was 3.174 b.b. versus 3.225 last month, down 155 m.b. Both a token gesture and certainly not the kind of cuts that one would expect after the prior month brought a horrific bad weather to crops. The USDA is under funded and staffed since the Homeland security division took the bulk of its personnel. The trade thinks that they won't do field surveys where ear count along with pulling back the husk for kernel surveys take place but either count just stalks per acre or count ear's per acre. That wouldn't show crop problems during pollination. That would be simple, easy and cheap, then let the harvest itself do all the hard work and unveil the true crop results. But you can't underestimate the USDA either. The last two years the August report used weather as a way to determine yields. This Julys weather certainly warrants their attention. Additionally, after the June planted acreage report the USDA said they would re-survey spring crop planting in four states including North and South Dakota, where 2 million acres of the increase planting acres this year were to be planted. This area in the upper planes suffered the worst of spring rains and flooding. The bottom line is it's not what the trade believes is true on yields and production but what the government will say. This report is set up for a conservatively neutral number that would be priced in bearishly on report day or a shockingly bullish report with up limit corn bids with beans and wheat gaining sharply in a follower's role. Corn looks to set the tone to Thursday's trade. The recent concern over the US economy and their debt rating saw large funds selling long held positions in their extensive portfolio pulling grains down. This takes much of the downside risk out of grains for report day Thursday and increases profit potential should the report be surprisingly bullish. In other words, a move higher should be greater than a move lower. A move lower probably would be used as a buying opportunity as traders believe they will eventually be right on thoughts of a much smaller crop so it's limited yet a bullish report could see an extended move as the market plays crop rationing catch-up. Consider buying a September call options on corn 25 cents out of the money or a strike 25 cents higher than the September futures price. There going about 15 cents or $750 plus commissions and fees. Risk half the cost. If the report is more bullish than the cautious estimates unveiled we could easily put 70 cents to a dollar on corn quickly.