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Outlook from the CBOT Floor for July 9, 2012

07/09/2012 @ 10:14am

The Grains Review
For the week of July 9, 2012
By Matthew Pierce
Coming back from the weekend it's game on again for bullsIt’s all about weather with only a modest break in temps seen over the weekend. Spotty rains in central IL and IN offered some fields 1” while their neighbor got a tenthThe erratic weather pattern continues to such an extent I’ve seen private estimates as low as 139 for cornOn Friday Informa lowered their estimate to 153.5 about matching Goldman Sachs and CropCastUsing current harvested acreage we get a 13.6 billion productionCurrent usage is estimated at 13.77 billionSomething has to give hereThere are a few in the mid 140s with LanWorth in that category with this a distinct possibility if rains do not start in the latter half of JulyMy point here is the USDA has no choice but to lower yield on this Wednesday’s WASDE reportThe damage is done in many areas with irreparable harm dramatically lowering yield

Looking to demand, as price moves higher due to supply problems there is chatter of changes to the Ethanol mandateThis is just a discussion but at some point they have to face the reality that current blend levels are unreachable unless corn prices break or crude rallies significantlyOutside of Ethanol, feed margins are negative across the board stalling or contracting Chicken, Hog and Cattle operationsThe one bright spot for demand is JapanThey need to cover 4-5 MMT of feed demand in the 4th quarter aloneHistorically they are 30-40% covered. This coupled to possible Chinese demand is the bright spotThe situation with corn is pretty roughPhotos I have seen from clients and on Twitter show very stunted and spotty fieldsThere are a few bright spots but a few great fields will not cover the losses in numerous scarred fieldsLook for crop progress today to drop ratings another 3-5% offering a bullish catalyst into the numbersThe COT comes out after the close which should show a massive gain in corn after solid gains in OI this past weekEstimates are currently around 125K long

Then the USDA numbers on Wednesday morningI expect the USDA to raise old crop stocks slightly while cutting demand due to price spikesThis is their attempt to quell a firestorm with a water gunNothing can stop this onslaught except drenching rains which there are none forecastedDo not look for the USDA to lower yield to reality but a number under 160 is very possibleThey will lower it and use their lower harvested acreage but a number under 160 alarms everyone because it will show a steep negative trend

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