The latest U.S corn and soybean production estimates were lower this month, but the U.S. Department of Agriculture (USDA) left ending stock projections generally unchanged for the 2008/09 crop year. U.S. wheat stocks also were left unchanged, while world stocks edged up slightly.
With the tendency for November yields to follow the directional trend of October (higher), the latest USDA corn yield projection at 153.8 bu. per acre (-0.1 bu) was a bit of surprise. But the USDA kept its ending stocks projection near 1.1 billion bu., thus keeping the lid on most traders' enthusiasm. This month's lower yields, due to a greater-than-expected impact of late-summer dryness in the Dakotas (-3 bu.) and northern/eastern areas of the Eastern Corn Belt (Ohio -7, Michigan -3 and Wisconsin -2) compensated for higher yields in Illinois and the southeastern United States. The USDA also cut U.S. corn export demand again by 50 million, because of recent slow overseas sales. They didn't adjust new-crop ethanol demand downward as some expected, but they did up last year's ethanol use by 26 million bu. because of new available data.
In soybeans, the USDA reduced its national yield forecast slightly (39.3 bu., down 0.2 bu.) with the northern (South Dakota -3, North Dakota -2, Minnesota -1 and Wisconsin - 2 bu.) and eastern (Ohio - 2, Pennsylvania - 1 bu.) areas of the belt compensating for higher yields in Illinois (+1) and Indiana (+2). The government didn't raise soybean export sales after cutting them last month, despite current sales being 80 million ahead of the pace needed to reach the current 1 billion bu. outlook. With the U.S. harvest winding down, South America will become the market's focus. The USDA cut Brazil's prospects to 60 mmt from 62.5 mmt because of credit difficulties and high input costs reducing seedings this year; Argentina's bean outlook was left unchanged at 50.5 mmt.
With U.S. wheat sales over 70% of current export sales, trade expectations for a 20 million to 30 million bu. increase in exports and a drop in old-crop stocks circulated. But the USDA didn't adjust U.S. stocks, and continued to lift world stocks to 145 mmt (+1.0) from 119 mmt last year. The USDA did cut crop estimates in Argentina (-1.0 mmt) and Australia (2.5 mmt) while raising forecasts for the European Union and Russia. The need for protein and the U.S offering credit to Pakistan keeps us optimistic about wheat strength later this year, but increase old-crop sales to 90% in $6.00-$6.30 range and 2009 sales to 25% in $6.50-$6.80, basis Chicago, for both hard and soft wheat.
World economic uncertainty continues to make the values of crude, the U.S. Dollar and equity markets price factors for grains. However, this fall's slow harvest reducing the time to source supplies, ahead of the Mississippi barge system shutting down in early December, and possible South American weather worries could still prompt corn and bean rallies. Be prepared to make sales on 50 cents to 70-cents, and $1.00-$1.30 corn and beans rises in the next few weeks.
The risk of loss in trading commodity futures and options can be substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.
