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Ray Grabanski: Grains hold gains

Grains for the most part are holding all of their gains after the USDA shocker of an October report, and now that the Nov. report is not far off (where once again they will revise the corn and soybean yields), it might be off to the races again!  New estimates for corn and soybean yields for the Nov. report should start to come out this week, with most private analysts expected to show further reductions in the corn yield estimates, especially since USDA showed such a drastic cut in the October report.  That might give the markets another boost this month, and with very little resistance until $13 soybeans and any resistance at all in corn, it could be an exciting few weeks.  

Meanwhile, the corn and soybean harvest is coming off nearly record fast, with most of the corn and virtually all of the soybeans expected to be harvested in October.  Its been almost perfect weather this month for harvest, with warm and dry weather for virtually the entire month that has allowed for a rapid corn, soybeans, and other late season crops harvest.  As of October 24, soybean harvest was 91% complete vs. an average of 72%, while corn harvest was 83% complete vs. 49% average, with virtually all other fall crops also well ahead of normal harvest progress.  

While the weather has been nearly perfect for the harvest, it has also been a little dry for winter wheat crops that were planted this fall. Winter wheat crop condition ratings did not come in all that good for their first rating of the year this week at 47% G/E, with conditions well below last year's ratings of 62% G/E.  These ratings suggest a crop that is struggling with lack of moisture to date, although the past 5 days was wetter than any so far in October.  

Winter wheat plantings are ahead of normal at 88% complete vs. 84% normally, with 64% emerged (equal to the 5 year average).  The market is extremely sensitive to crop ratings, though, as the Russian crop is still in questionable shape in western Russia (struggling with dry conditions).  Russian President Putin announced the Russians will be out of the export business into July 2011, which also has made the wheat market more sensitive to any price positive news.  

Outside markets also continue to provide support, as the US dollar continues to erode on expectations of the FED pursuing an easy money policy in the US. That lower dollar is supporting all commodities, and it's not only the grains that are high priced right now. Sugar, cotton, and metals (gold and silver) are all trading at or near all-time highs, and that is providing impetus to grains as well.  Overall, it looks like at least a test of the 2008 highs might be possible in the coming year, or at least the best test we might be likely to mount in the next decade!  

While prices are relatively high, demand for wheat and especially soybeans on the export side is evident.  There is no market more hot on exports than soybeans, with a regular reports weekly of over 50 mb shipped and sold, even at prices approaching $12.  The soybean exports have just been outstanding, and are making an argument that even record projected soybean exports might still be too low for now.  While soybean exports are on fire, though, corn exports have started to slow considerably the past few weeks.  It looks like the corn exports may have started to be rationed out for now, with everyone uncertain whether than will continue the whole year through.  But until we know more about corn production in the US (at least 2 more revisions in yield likely, corn buyers still cannot rest easy as prices remain in the bull category.  

The next major reports will be coming in early November, and they could provide more interesting fireworks for the grain markets.  Stay tuned!  The bull market of 2010 may not yet be over quite yet!

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The information contained, while not guaranteed as to accuracy or  completeness, has been obtained from sources we believe to be reliable. The opinions and recommendations contained are based on our judgment and do not guarantee that profits will be achieved or that losses will not be 

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