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Wheat market bottom

Wheat markets might have finally found a bottom. Wheat closed higher yesterday on
a negative report which has been waited on for some time by the trade.

Obviously, the HRS wheat crop was much larger than USDA had previously reported
in the August report, and in this report they raised the ND yield 10% in wheat,
barley, and durum. All of these numbers were quite large revisions for the last
report of the year. Maybe the limit of change from one month to the next is
10%? USDA offset some, but not all, of the wheat production increase in HRS
wheat by cutting most other classes of wheat (except durum). It looks kind of
suspicious, but winter wheat changes at the end can and often do happen, and we
can only shake our heads and wonder about these late USDA changes (like changing
2008 soybean yields today).

But alas, USDA is the numbers we will be trading for now, and these are the
numbers that will be plugged into the S/D balance sheets as well. So here we
are, with another year gone by for small grains. It was a good crop for most,
but especially in barley where yields were the best ever since reporting began.
A perfect production year was followed by a pretty good harvest season (although
later than normal).

Today's upside reversal in wheat supports the premise that wheat prices may have
bottomed finally! Buying continued all day after the negative report, and you
wonder who was left to sell when the opening bell selling abated. The only ones
who didn't know about the large US HRS wheat crop apparently were selling this
morning at the lows, while everyone else was buying. These guys who were
sellers are probably trapped in a bear market trap set by the negative USDA
report this morning.

For bulls, though, the line is now drawn in the sand, and its apparent that any
bullish trader now has a specified risk parameter (today's lows) that can be
relied upon. If we can't hold those lows, maybe there is more downside risk but
it doesn't look likely today that these lows will be broken. Wheat harvest is
complete, and bin doors are probably slammed shut for now on wheat that didn't
already find its way to a point of sale.

Much might be determined by the corn and soybean crops, then, which still has
virtually all of the harvest ahead of them, yet. If corn and soybean crops come
in larger than expected, maybe wheat prices can come under further pressure.
But given all the large crop expectations earlier this year (our yield models
touched 166.5 bu corn and 45.6 bu soybeans at one time), but they are starting
to slip lower as we finish out the year. That indicates to us that yields are a
little disappointing to producers, and we might not see that record shattering
yields that many were expecting in late August. What is most surprising is that
these yields were jumping much higher earlier in August, but all that nice
weather in September didn't hike yields much from those lofty levels projected
in August. Kind of disappointing to many, but the market is not as likely to
sag as low as was earlier expected at harvest with a sliding condition rating as
we enter harvest.

Can we rally corn and soybeans during harvest? That's not as likely as simple
sideways to lower trade, but the big dips are probably over for now. Stay
tuned, we still have more fun to have before the year is out, but for now it
looks like we've done all the big moves lower that we will make for 2009. Get
ready for a market like watching paint dry now in corn and soybeans, as we might
not track any direction for the next few months in this slow and methodical
market. No news is no news, and right now everyone knows we have an above
average 2009 corn and soybean crop, and its not likely to get much bigger now
that the bloom is off the yield expectations. For now, wheat might be the
market to follow, as wheat has harvest over with and is free to move higher
without the fear of dumping massive amounts of grain onto the market. Corn and
soybeans, however, still have the 'harvest pressure' to deal with, and that
could prevent them from flowing higher even if the yields are not quite up to
expectations.

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 futures and options on
futures.

If you have questions about this column, call Progressive Ag at 1-800-450-1404,
or email ray at rlg@progressiveag.com.

Wheat markets might have finally found a bottom. Wheat closed higher yesterday on a negative report which has been waited on for some time by the trade.

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