The USDA on Friday's crop production report estimated 2007-08 corn production at 13.054 billion bushels--above the 12.840 billion estimated in July and the 12.909 billion bushel average analyst estimate. The yield per acre was projected at 152.8-higher than the 150.3 forecast in July and the 151.2 average analyst estimates. We have a 13 billion bushel corn crop, and that is good. We need it as the demand is that strong.
We think it will be a growing season where states like Illinois carry other areas of the Corn Belt. December corn should be in a trading range from $3.20 to $3.50, and we feel the USDA is underestimating 2007 -2008 corn demand. This will take some time to prove. At some point, corn will start trading demand and that will signal the harvest lows being in. A trading idea is to buy breaks in 2008 corn.
The USDA pegged 2007-08 soybean production at 2.625 billion bushels vs. the average of trade estimates at 2.653 billion. Soybean yield is projected at 41.5 bushels per acre, unchanged from the July trendline yield. Some traders think this could be the lowest soybean estimate of the season if weather conditions across the Midwest are favorable through August. One thing that is for sure, that you shouldn't underestimate the weather over the coming four weeks.
Some spreads to consider is buying SN08 and selling SX08.We also think long CZ08 and short WN08 is worth considering on setbacks, given the likelihood of surge in ‘08 global wheat acreage and prospects for shrinkage in 2008 U.S. corn area. Do not overlook lower risk spread trades and shifting acreage to crops most in need of a supply boost. Overall, we think the soybean complex will be the leader in the year ahead, that corn will base at a higher level, and that 2008 wheat will be a wonderful sale but not until this old crop price rally has run its course.
In our last issue, we had two trade recommendations and both trades were stopped out for losses. This is not the first error ever and certainly shall not be the last. We do appreciate hearing from all of you, and please contact us at anytime.
