PRE-REPORT THOUGHTS

Monday's weekly U.S. export inspection report showed demand is simmering before the boil. Drought in Mexico, Argentina and southern Brazil keeps demand inching up each week as weather relief evades these regions, leaving importers shuffling in to get some crop insurance in case South America falls short of inventory at price values expected this time of year.

Soybean inspections were 37 million bushels, with China in for 30.8 of the total versus 27 the week prior and 4-week China average of 26 million.

Corn inspections were 39.3 million bushels versus 22.8 last week, 29 a year ago and above the 4-week average of 30 million. It's the better demand recently over competing exporter countries that has traders looking for a friendly to bullish crop report by the USDA Thursday at 7:30 a.m. Central.

The report estimates by 25 major brokerage industry analysts put carryover or ending stocks of corn, come August 31, at 786 million bushels, down 60 million from last month and 342 million less than a year ago. The range of guesses is 608 to 850.

For wheat, the estimate is 860 million bushels, down 10 from last month and 2 million under 2011.

Bean estimates are 267 million bushels, with a range of 200 million to 301 million, and 8 million bushels under a month ago.

The rule of thumb is, any number at the high end of estimates we open lower and if it's on the low end, we open higher. To open higher and close higher, we need to come in under the lowest estimate. To open and close lower, need to come in over the highest estimate.

These generally lower estimates come as the trade sees drought raising our export projections and lowering ending stocks. Pre-report estimates have cut Argentina corn by 4 million tons from last month, and Argentina soybeans 2 million tons from last month. Also cut was Brazil's corn, down another 1.2 million, and soybeans by another 2.2 million tons.

Warning: let's not lose sight that our last five government reports have come in less bullish than pre-report estimates. Since we have rallied in prices sharply into this report, there is room for profit taking afterwards if numbers are in line with pre-report estimates.

The result of a neutral to bearish corn report will likely be a pullback to $6.16. A friendly to bullish report and $6.64 is next, basis March futures.

A neutral to bearish bean report and $12.00 could be seen, but if it is a bullish report, $12.60 basis March soybean futures is next. March wheat on a bearish report could sink to $6.20 or it could rally to $7.00 on bullish numbers.

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