After heavy rains prompted flooding in northern areas of the U.S. Corn Belt and extreme heat and dryness scorched the southern sections of Midwest and the Southern U.S. over the last month, the market will be highly anticipating the USDA's September 12 update to see what impact this highly diverse weather has had on this year's corn output.

Field results from last week's Midwest crop tour of the central and northern areas of the Belt provided a mixed set of results. This year's ear length was up slightly, while kernel rows were generally unchanged-except for a jump in SD which was in major drought last year. Ear counts also were up, but only modestly in four states and down in OH and IN. Because of this month's heavy moisture in the areas traveled by the group, the organizer raised its corn yield estimate to 153.5 bu. per acre from the USDA's 152.8 bu. level. We are keeping our yield at 151.6 bu. (for a 12.95 billion bu. crop), due to the excessive heat in the southern areas of Midwest (where the group didn't get samples and the advanced maturity of this year's corn crop could prevent additional ear weight gains).

Strong demand also remains a positive for corn, with new crop export sales by mid-August at the highest level in 10 years. This year's weather problems in Europe (which cut its coarse grain output sharply), and the current strength of wheat shifting purchases to this feed grain, were behind the USDA increasing foreign demand 150 million bu. last month and could prompt further Asian interest later this year. U.S. ethanol plant expansion remains on a pace to require the current 3.4 billion 2007/08 forecast if all plant capacity is utilized. However, overcoming some distribution concerns, and the yearly renewable fuel standards level for the next few years in this fall's new U.S. Energy Bill, will determine if the forecast is correct or if it will need to be scaled back. 

After this spring's dramatic jump in plantings, 2007/08 corn supplies probably will be adequate to meet livestock, ethanol, and overseas demand. However, end users should begin accumulating yearly coverage in December's $3.20 area, with early harvest yield reports determining if values slip to the $3 area. Acreage competition with soybeans, which need to recapture acres in 2008, should help rebound prices nicely next year.