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Answers or more questions

The USDA will be busy issuing reports Monday morning and the market hopes the numbers will provide enough answers for a foundation on which to trade for the rest of the summer.

Of course, there will be questions about yield for the rest of the summer. But a more accurate acreage estimate and demand estimates (via the grains stocks report) will give analysts new data for the latest supply/demand tables.

The average pre-report estimates are:

Wheat stocks 275 million bushels, corn stocks 3.894 billion bushels, and soybean stocks at 663 million bushels.

The average analysts estimates for corn acres are 85.661 million, soybean acreage at 74.257 million, and All Wheat acreage at 63.808 million.

The corn numbers have the most power to influence prices. Regarding the stocks report, prices were very high during the quarter and the market will look to see the amount of feed rationing that occurred. This also influences new crop prices as the market will get a sense of how easily (or not) it will be to reduce feed use.

Regarding feed use, the market will see the hogs and pigs report on Friday afternoon. The number of pigs in the light weight categories and the farrowing estimates will help the market determine feed use in the 08-09 crop year.

Remember the USDA has significantly underestimated the size of the 2007 soybean crop. The market has realized this because the previous grain stocks estimates have been larger than estimates. (There is no large fudge factor for beans as with corn feed use). It could happen again with this report. For right now, the USDA adjusts the residual in the supply/demand tables to make everything balance. This problem will continue for a few more months until the USDA can resolve it in September with a revised crop size.

The acreage numbers are the wild card. There was special survey work done in the six states most affected by the floods. Perhaps the discussion of the survey in the acreage report will give the market comfort that the numbers are reasonably accurate. Then again, perhaps the market will be left continuing to guess about the effects of the wet weather. It's going to be a long summer.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

The USDA will be busy issuing reports Monday morning and the market hopes the numbers will provide enough answers for a foundation on which to trade for the rest of the summer.

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