Wheat market has dropped enough from recent highs to have formed a potential 

top in the wheat market, a factor that may have major implications for the corn 

and soybean markets.  Wheat prices that have dropped $1.50 from the highs last 

Thursday night indicate a potential 'blow off top' has been formed in wheat, as 

prices have dropped more than 7% from recent highs.  That means a potential top 

has probably been formed in wheat for now, with prices rolling much higher than 

anyone expected, given we still have nearly 1.1 billion bushel carryout projected 

for the US this coming marketing year.  However, it's likely the USDA will cut 

that projection significantly in the August report tomorrow morning (perhaps to 

800-850 mb?), due to larger exports.  But US wheat yields might also see a 

hike, as US HRS wheat yields are better than expected, and winter wheat yields 

were also large (likely record large).  

Still, US and world supplies of grains are still adequate in spite of a large 

cut expected in world wheat and feedgrain supplies.  US corn and soybean yields 

are likely to be hiked as well in the upcoming report, with Pro AG yield models 

showing corn yields at 165.3 bu/acre and soybeans at 43.81 bu/acre (both above 

USDA's 163.5 corn and 42.9 soybean yields from July).  It's likely the USDA will 

show that US crops are going to be above average, and we'll help meet the 

shortfall from the growing season troubles across the world.  

We may see a bounce in grain prices once the report is over, as wheat prices 

(even though they've likely topped) typically regain some of recent losses 

following a V top (33-50%), so it's likely that sellers will have another chance 

to sell the market at these heightened levels again.  That rally should come in 

the next week, so it will need to occur after the USDA report.  Pro Ag expects a 

50-75c rally from the lows, and already today we are getting about 25c of that 

rally.  It will be interesting to see how the market reacts to tomorrow's 

report.  It is unlikely USDA will cut ending stocks of wheat much more than 200 

mb in this one report, as that just isn't their style to do such drastic changes 

month-to-month.  Instead, it's likely they'll spread out those hikes in demand 

and cuts in ending stocks over a few months reports.  Pro Ag looks for a hike in 

wheat production, a cut in wheat feeding, and a drastically higher export 

projections that, in the end, will result in smaller ending stocks of wheat.  

We simply must recognize the FSU and EU production problems, and that will 

reflect in larger exports.  World ending stocks of wheat are also likely to be 

cut.  One thing being talked about in the trade is Russia potentially needing to