Corn: It all comes down to Friday's USDA Monthly Crop Production Supply Demand Report for near term direction. On corn- the average pre-report trade guess by the twenty major brokerage firms sees corn production at 12.932 billion bushels up from the August Report of 12.761; and a year ago of 12.101. The range of guesses is 12.697 to 13.127. The increase in production also has the ending stocks figure for the new marketing year at 1.768 b.b. up 47 m.b. from last month. As you can see, the range of guesses is tight with everyone seemingly thinking the same, which we are going to see near or better than record yields. General George Patton said, When everyone is thinking the same...then someone isn't thinking. This leaves room for a surprise. In fact there is on the crop estimate that came out several days ago that was not on the pre-report estimates given, suggesting the colder and cloudier then normal August will leave corn production down at 12.237, 460 m.b. under the lowest pre-report estimate. That would lower Ending Stocks considerably. Remember... it is not how the Market opens on Report Day, but how it closes, that tells you the Near Term Trend and it may take large Trading Funds the week end to digest the report before coming back in. Let's get ready for anything- if the Crop Production Numbers come in over the high end of estimates 13. b.b. or more we can expect to trend lower. Last year corn broke 2.00 after the September Report but of course we were trading at 5.50. we should expect that with prices already 1.50 off our June High and bouncing off 3.10 we should not expect another leg down lower than 2.72 with first support at 2.94. On the other side, anything on production near the low end or under 12.600 b.b. 2.94 would be the worse case scenario with current lows possibly being are pre-harvest lows and holding through harvest. Note- when harvest gets underway we expect to see strong demand from Asia, ethanol producers and feeders to lock in the harvest low bids as prices again will be projected higher into spring. In summary, the report will either lock in recent lows of 3.02 for December Corn and firm back to the 3.30 to 3.60 area into the harvest season or give us one more leg down to 2.94 to 2.72 to establish a new low to be bought for a late year rally. The purpose of getting these thoughts on markets out prior to and the day of the report is to give a fair balance of thought so as not to get caught up in report day volatility and emotions.
Bean: The Soybean Market will be most watched for report results due to its late planting dates but like corn, bean gurus too have locked in to this big crop year as any heat stress was gone from the summer growing season. The pre-report average trade guess is 3.256 b.b. vs. last month's report of 3.199. Ending Stocks are forecasted at 226 m.b. up 16 m.b. from last month's report. Well we are going to need more as it is clear world demand for protein from beans will have another record year. The range is 3.186 to 3.309. One private crop forecast, not included in the pre-report estimates is calling for 3.021 b.b., well under the lowest guess on the range estimate and the August USDA Report of 3.199. Because of the extraordinary demand for U.S. beans, especially into China and drought conditions in Argentina as beans get ready to be planted, a low number under the range estimate could see a cut in Ending Stocks under 200 m.b. as the government sees not just lower production, but better exports on overlooking of U.S. beans. Demand at harvest is sure to be very aggressive. This would put our recent low of 9.02 basis November to hold through year's end with a move back to 9.90 to 10.25. However, should we push the high end of the range 3.300 b.b. or more, another leg down should be expected with a test of 8.80 and possible 8.40 for a long term buying opportunity. Regardless of the reports near term effect into the month's end, we are very Bullish long term into next spring.
Wheat: The Wheat Market looks to the Friday Report through the eyes of corn and beans as the government is not expect to adjust the wheat production until the September 30th Small Grains Report is released. They expect the problem of record inventory to get worse with an estimate of 769 m.b. vs. last month's 743 m.b. This comes with exports off 40% from a year ago. Domestic and foreign importers buy only as needed monthly and let the producers sit on inventory avoiding storage and insurance costs. This makes sense under the economic uncertainty that continues to hang over businesses. Unless corn and beans see a bullish surprise on Friday's Report pulling wheat for the ride, wheat remains down unless a close over 4.74 occur breading minor resistance, then buy.