The USDA's latest monthly production and supply/demand reports provided some surprises for the market in our domestic row crop prospects. Meanwhile, revisions in their world wheat balance sheet were a bit modest vs. trade expectations.

Strong plant populations and early season harvest reports of better-than-expected yields from IL had trade expectations for a larger crop circulating. But September's update, jumping the U.S. crop to 13.3 billion bu. with 155.8 bu. yield, was 180 million bu. larger than trade ideas for this report. Increases in all of the 10 major producing states prompted the WCB's average yield to rise by 3.5 bu to 162.8 bu. this month, while the ECB's average output was up 2.9 bu. to 160.9 bu. Heat and dryness slipped the Southeast yields by 1.1 to 92.8 bu., but stronger yield prospects in the Plains countered some declines-because of drought in the Mid-South. Higher feeding and exports compensating for slight decline in ethanol helped limit 2007/08's ending stocks gain to a 160 million bu. rise for a 1.675 billion level.

U.S. soybean output, however, was shaved this month with the national yield off 0.1 bu, resulting in 2.62 billion bu. output. August's heat and dryness in the southern Midwest, mid-South, and the SE dropped their average yields by 1.4 bu., 3.3 bu., and 2.9 bu., respectively, while the WCB regional yield was up 1.6 bu to 43.6 bu. because of heavy August rains. The USDA also upped bean's old crop demand by 20 million bu. because of late season demand keeping both crush and exports firm. But they also cut new crop exports because of likely front end shipments from South America resulting in a 2007/08 stocks level of 215 million.

The USDA did drop world wheat output by 4.2 mmt because of lower EU (-3.1), Canadian (-1.2 mmt), and Australian (2 mmt) crops. But they also upped FSU's crop (2.2 mmt) and curtailed demand by 1.5 mmt, resulting in just a 2.4 mmt decline in world ending stocks to 112.4 mmt. This news prompted some profit-taking, which then led to some wheat/corn spread unwinding. With rains in Australia's forecast for next week, producers should have 2007/08 and 2008/09 sales at 90% and 35%-40%--after December and July 08 hit our $8.50 & $6.25-40 sell points recently.

Producers with possible storage issues should consider moving their final 10% old-crop beans at current price levels. Otherwise, hold 2007/08 corn and beans sales at 40%-45% and 35-40% for post-harvest price potential, as the world becomes increasingly concerned about a possible protein shortage for the 2008/09 crop year.