August 18, 2011
By: Craig Haugaard, Grain Origination Manager

We are seeing some problems with the overseas markets this morning.  This has crude oil lower and the dollar sharply higher.  This may put pressure on the commodity market today.

CORN: 9 lower

We had some cool news to kick around yesterday.  Perhaps the most interesting report that I read was from Iowa State University where climatologist Dr. Elwynn Taylor has lowered his projected national average yield to 149 bu/acre based on “deterioration continuing in the nation’s cornfields.”  Just for the heck of it let’s assume that Dr. Taylor is the smartest guy in earth and that his assessment of the crop is dead on.  If that were the case and we left the rest of the USDA’s assumptions unchanged then the corn numbers would look as follows:

Planted 92.3
Harvested 84.4
Yield 149
Carry-In 940
Production  12576
Available 13516
Feed 4900
Industrial/Ethanol 6510
Export 1750
Total Usage 13160
Carry-Out 356

Now toss in the USDA report from Tuesday that seemed to indicate that the prevent plant acres may reduce the planted and harvested acres below what was in the August report.  Just for the heck of it let’s assume that maybe the acres will be a half million less than what the USDA, in which case we could knock another 75 million bushels of production out production and drop the carry-out to 281 million bushels.  Now, obviously until we actually get out and start harvesting we are not going to know how big this crop is but thus far the general consensus seems to be that it has been getting smaller rather than larger this summer and ultimately that could push us up into a test of the 2008 highs.  With the overnight market lower and pressure coming in from outside markets, two of my three indicators are still bullish.

SOYBEANS: 11 lower

I believe that the Pro Farmer crop tour is next week so perhaps we will get a little more concrete information to go on but for now the general consensus is that the bean crop is deteriorating and that yields will be down.  I spoke with a friend who farms in Indiana yesterday and he was telling me that his yields look like they will be sharply lower than last year.  Of course, I could line up folks from here to the moon to swear that their crops are going to be smaller than last year but as long as it is anecdotal evidence it is hard to get real excited about it.  The truth will come out when the combines roll.  In the mean time we are left to speculate on final crop size and yesterday the story line was that lack of rain in the south and eastern Corn Belt has hurt this crop.  Toss in fears of La Nina popping up in South America this year and we had the stage set for yesterday’s rally.  Today we should start out lower as a result of the outside markets but longer term we will probably return to yesterday’s scenario and more bullish exuberance.  As we start this morning’s session all three of my technical indicators are bullish.

WHEAT: 13 lower

Stories of poor HRS yields and the ongoing drought in HRW country propelled the wheat market higher yesterday.  Then there is the story that those of us who raise wheat would like to ignore, the Black Sea story.  In the months of July and August Russia exported 5 MMT of grain, which is more than their annual exports of last year.  It would appear that cheap Russian wheat is not going away anytime soon and thus that cloud remains over this market.  None of those conditions magically changed overnight but with the pressure of the outside markets today we should start out lower.  Technically, all three of my indicators remain bullish although stochastics is getting close to turning into a sell signal.

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.