With the prominent private crop forecasters lowering their crop sizes and this fall's harvest winding down (86% done, up 13% last week), the corn market has firmed. And it is modestly heading into the USDA's next monthly crop production and supply/demand updates for the U.S. and world, which will be released on November 9.

After last month's 1.1 bushel drop in the national yield, we are expecting another modest decline on the USDA's November update-due to a 1 bu. drop in the WCB and 0.6 bu. slippage in ECB yields from last month. Wet weather likely increased field losses in the west, while late-season dryness occurred in the east and southeast. We are expecting a very modest 63 million bu. decline in the U.S. corn crop (to 13.255 billion), with average yield of 154 bu.

A downward adjustment in last year's ethanol demand level seems likely, given the final 2007/08 ethanol output for corn crop year of 5.85 billion gallons (35 million bu.) to keep the U.S. plant conversion level in line. But this will mean that last year's feed usage level needs to rise 35 million, because this year's September 1 supplies will remain at 1.304 billion for beginning stocks. This has prompted some to cut the coming year's ethanol demand. But given recent strength in ethanol prices (over 20 cents) to the $1.80 area as gasoline distributors pick up this fuel at levels sharply below wholesale gasoline prices, we anticipate no change in new-crop ethanol demand will occur this month. However, this year's strong overseas demand (47% above the pace to achieve the USDA's 2.35 billion projections) suggests that 2007/08 exports could be raised another 50 million to 100 million this month, prompting this year's ending stocks to tighten to 1.884 billion bu. vs. 1.997 billion bu. in October.

Given these adequate ending stocks, corn's daily price activity likely will be influenced by soybean and wheat price trends-along with energy, precious metals, and the values of the dollar. However, producers should take advantage of March 2008 price strength in the $4-$4.10 range to have 65% of 2007/08 marketing completed, in order to cover cash needs this winter and into early spring, and utilizing the current rising carry in prices now available. Also, given the higher costs of 2008 inputs, producers should have 25% of next fall's corn output priced in the $4.30-$4.40 area, basis December 2008 pit price.