August 10, 2011
By: Craig Haugaard, Grain Origination Manager

CORN: 10 higher

A temporary easing of worries over the world financial situation allowed the commodity markets to rally back from the lows established during the overnight session.  
The average trade guess going into tomorrow’s report is that the USDA will give us a national average yield of 155.2 bu/acre. This is based on the average of the guesses from 23 different private analysts.  If we take the USADA numbers from July and just substitute in a 155.2 yield instead of the 158.7 that was used in the July report we get the following numbers.

Planted 92.3
Harvested 84.9
Yield 155.2
Carry-In 880
Production 13176
Available 14076
Total Use 13500
Carry-Out 576

It is assumed that we may see the harvested acres number drop a bit but that we will also see the total use numbers slip from what the USDA was using in July.  Never-the-less, the thought that we could see the carry-out numbers slip into an area that would seem to suggest some rationing was cause for pause yesterday.  Also helping out the bullish cause was a report that the top soil in Illinois is reported as 55% short.  In Iowa the number is 38% short.  Last year the numbers were 26% and 2% respectively so this once again has generated some discussion about the potential yield reduction that may have occurred as a result of the abnormally hot temperatures.  Looking at today I would expect the trade to open higher, in line with the overnight trade and then see what the equity markets do.  Normally one would expect the market to be a little tempered ahead of the Thursday report with perhaps a little profiting taking.  Technically, two of my three indicators are currently bearish.

SOYBEANS: 15 higher

The average trade guess from the aforementioned 23 analysts have pegged the projected national average yield at 42.8 bu/acre.  If we take the USADA numbers from July and just substitute in a 42.8 yield instead of the 43.4 that was used in the July report we get the following numbers.

Planted 75.2
Harvested 74.3
Yield 42.8
Carry-In 200
Production 3180
Available 3395
Total Use 3264
Carry-Out 131

While that would appear to be a pretty snug carry-out the fact is that yesterday the trade was focused on a forecast that appears to contain wetter, cooler weather, in other words pretty darn good conditions for beans at a very critical time period.  It was this hope/fear of better crop conditions that lead beans to be the only loser among the big three on the board yesterday.  This morning the market will be buoyed by the news that the Chinese imports for July were higher than the trade had been anticipating.  China imported 5.35 MMT in July, up from the 4.95 imported in August of 2010.  This keeps China on pace to meet the USDA annual projection and then conventional wisdom has been that China was going to fall short of that projection so this is a bullish turn of events.  From a technical standpoint last night’s action turned stochastics higher so now two of my three indicators are bearish.  From a technical perspective the most positive thing that I can say about beans are that they appear to be getting oversold and they did not close below that support line on the November chart that we shared with you in this space yesterday. 

WHEAT: 12 higher

In this space yesterday we discussed the shortage of topsoil moisture in HRW country and the fear that this may eventually end up in the reduced planting of HRW acres.  This fear helped propel the market higher yesterday.  That coupled with the idea that we will see an increase in the feeding of wheat this year should help this market to at least consolidate within the recent trading range.  Looking at it from a world perspective I see that Russia continues to beat us in the export market with them most recently getting the Egyptian business.  I saw a report yesterday in which Russian governmental officials indicated that we could see them export as much as 23 MMT of grain this year.  That is up sharply from the 12 MMT that the USDA currently has factored in for them. Technically, two of three indicators are bearish

The information contained above was taken from sources which Wheat Growers believe to be reliable, but is not guaranteed by Wheat Growers as to accuracy or completeness and is made available for information purposes only.  There is a risk of loss when trading commodity futures and options.