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Rich Nelson: USDA data remains solid, little change seen

09/11/2010 @ 11:21am

Corn: USDA’s report pegged the yield at 162.5 vs. Allendale’s survey at 162.3. First, we want to thank everyone who helped with the Allendale survey. Farmer participation is key and Rich Nelson and staff did another incredible job. We believe the report is solid on yield and we should not see much variation from this number. The trade however feels that a significant decline in yield is still likely. Based on facts, crop conditions did not reflect much more of a decline than the yield already factored in today. Secondly, USDA normally increases the yield in coming reports 70% of the time over the last 20 years. AS for prices, we believe that the following table will provide you guidance:

            End     Average    Futures       Futures
Bushels    Stks   Stocks/Use Cash Price Upside Target Lowside Target
162.3     1.090       8.1%      $4.20         $4.80          $4.10

Next week we should see the markets begin to reflect harvest activity. WE would turn to the sell side of the market in the 480 area if rejection is seen and over time, we will look to be a buyer on a harvest sell off. Remember, the 1.1 billion bushel end stock, we now have, is tight…but it is not a shortage unless there is a huge jump in demand or a production problem next year. Price RANGE not one sided TREND is more likely.

Direction: Support is 430. Short term resistance is around 480. End users should buy cash due to the wide >60 cent basis. Producers should be cautiously using options or futures to adjust previously sold option positions up to current levels. Getting a start on 2011 would also be a good idea as profits against operating can be locked in…Bill Biedermann

If Yields Continue to Decline: Last week we sent the brokers some quick ideas on what to expect with tomorrow’s report. The table below is a recap for your perusal…Rich Nelson

160.0       929       6.9%      $4.50         $5.20          $4.40 
158.0       792       4.9%      $4.85         $5.60          $4.80
 
Trade Recommendation:

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