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.