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Calm before one more storm?

Grains have been calm the
recent week, with corn trading with small losses the past 5 days following the
two limit up days after the USDA report. 
Soybeans have wallowed in the recent range as well, while wheat prices
have fallen from report highs to below the $7 CBOT support area.  But just when the market bears were
lulled to sleep, boom, the market has another limit up day in corn today
(Wednesday) that pumps the market right back up near old highs.

 

Could it be that the market
has one more storm to run through yet in 2010?  We have not yet gotten the final USDA numbers on corn and soybeans
yields for 2010, and US numbers can still drop (especially in corn) considering
how drastically USDA cut corn yields in the October report.  Typically, once they start cutting in
the fall, the trend continues right into the final USDA Jan report.  Right now, there is no room in the corn
S/D table to allow any more cuts in production, so any yield cut will be felt
directly in the marketplace.  

Soybean yields also were
surprisingly cut in the October report, even though the yields as reported by
many producers across the country was better than expected yields.  With soybean harvest now nearly
complete (83% harvested by Monday, Oct. 18) and nearly ideal harvest weather,
many analysts are starting to wonder if USDA is going to reverse course and raise
yields in the next report.  That
would be much against typical USDA precedent, and Pro Ag would be surprised if
they admitted that big of a mistake (cutting October and then hiking
November).  Instead, USDA may be likely
to keep projections about unchanged.

Winter wheat producers were
starting to get concerned with recent dry weather.  While the dry weather was ideal (especially for the soggy northern
corn belt) during October, it also dried out soils that typically are
germinating winter wheat.  It was
virtually lights out with no rain in October, very unusual weather indeed
considering how wet much of September was (again, especially in the northern
and western corn belt).  With
harvest of corn (68% done by Oct. 18) and soybeans nearly complete, the weather
forecast is now turning wetter in the extended outlook, with increasing chances
of rain coming the next 2 weeks. 
That might be welcome weather, especially in the now drying out eastern
cornbelt and HRW wheat country. 

World weather remains mostly
favorable, although eastern Russia would like to have more rainfall to plant
and germinate winter wheat. 
Central and eastern FSU countries have received more generous rainfall
since September 1, helping to replenish depleted soil moisture in these dry summer
areas.  It does appear the drought
it over for central and western FSU countries, but the drought lingers in
western Russia.  South American planting
progress has been slow to this point in northern Brazil, but increased chances
of rain in the coming weeks will help to provide soil moisture to germinate
crops in the northern most region. 
The improved rainfall will keep crop prices subdued and planting
progress moving along.

However, the influence of
the US dollar seems to also have a strong influence on grains, with the dollar
running to recent lows until China announced plans this week to let their
currency float a little more, and raising interest rates 0.25% to try to quell
inflation in that country.  That
always seems to have an influence on grains, and once again 2010 is no
exception. 

In the final analysis,
grains might have one more push higher due to a potential friendly November
USDA report.  After the last
bullish report, we just might catch many speculators on the wrong side of the
market this time, as most are expecting another friendly report in
November.  But how much can prices
rise in the mean time?  And at what
level will prices be during the November report?  It seems to me that the market might find enough volatility
to take the market to new highs long before the Nov. report takes place.  And that could set up some major
fireworks for the actual report.  

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 incurred. Recommendations should not be construed as an
offer to buy or sell commodities. There is substantial risk of loss in trading
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