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Demand, frost worries seen driving post-USDA report markets

Earlier this summer -- when floodwater covered thousands of acres in the Midwest -- some analysts expected as much as a 20% cut in this year's corn crop. But, farmers responded and the crop's made huge strides to catch up. Now, the crop is in a race to reach maturity before this fall's first frost.

Tuesday's USDA monthly Crop Production report contained many numbers that were hardly shocking. In fact, aside from a 155-bushel-per-acre estimate for this year's corn yields, most numbers fell into previous trade guess ranges. At first glance, 155-bushel corn might seem negative to the marketplace, but even at that clip, the crop would hardly overwhelm the demand that's building at home and abroad.

"When you take time to look through the numbers and what we have in the projected increase in demand, it suggests to me we're changing from a market totally focused on weather to one where demand is a very key factor," says Alan Kluis, president of Northland Commodities in Minneapolis, Minnesota. "I would not rule out corn closing higher considering other factors."

"The old saying is that it takes a negative report to put a bottom in and that may occur today," Kluis adds.

Market Analyst Rich Feltes of MF Global on Tuesday morning talks about frost concerns right now and moving ahead into this fall's harvest (video by Mike McGinnis).

Given the notion that Tuesday's USDA production numbers are already built into the market for both corn and soybeans and while the marketplace turns its attention to crop demand at home and abroad, farmers' attention in the nation's midsection now turns to the weather. Anxieties are already building about an early frost and what it could do to this year's crop that's already tardy in its development. Those concerns are well-grounded, Kluis says.

"Looking at the agronomic data, we are at least 10 days behind, and specifically the area north of Highway 14 in southern Minnesota, that whole area north of there is going to be vulnerable," he says. "If we get a freeze in the week of September 27, it would cut about 400 million bushels off the corn crop. Each week that goes on [without a frost], we will save 100 to 150 million bushels a week."

But, to date, the frost anxieties out there have yet to cause a stir in the grain trade. "Right now, I don't think we have a lot of frost premium built into this market," Kluis says.

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Earlier this summer -- when floodwater covered thousands of acres in the Midwest -- some analysts expected as much as a 20% cut in this year's corn crop. But, farmers responded and the crop's made huge strides to catch up. Now, the crop is in a race to reach maturity before this fall's first frost.

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