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Grain prices rally

08/12/2010 @ 9:40am

CHICAGO, Illinois (Agriculture.com)--The USDA released bullish/bearish data in its August Production, Supply/Demand Reports Thursday.

For the U.S. crop, the USDA estimated the 2010-11 corn yield at 165 bushels per acre, vs. the average analyst estimate of 164.1 and the USDA’s July estimate of 163.5 bushels per acre.

For soybeans, the USDA estimated the 2010-11 yield at 44.0 bushels per acre vs. the average analyst estimate of 43.2 bushels per acre and the USDA’s July estimate of 42.9.

The numbers the market is focused on are the U.S. grain carryout estimates, world wheat grain production figures, and the world carryover estimates.

What makes this report bullish is the USDA’s 2010-11 world wheat carryover estimate at 174.8 million metric tons, sharply lower than its July estimate of 187.1 million metric tons. 

Early calls for the commodities are higher, according to the CME Group floor traders. Corn is seen up 4-6 cents higher, soybeans up 5-10 cents, and wheat up 10-15 cents.

"Yields are high enough that you are getting a mixed response from this report," one CME Group floor trader, choosing to remain anonymous, says. "Our camp is buying any set back today, ignoring the report and the outside markets, and worried about hot and dry weather in southern Corn Belt and excessive wet conditions in Iowa.

The trader adds, "We think August 1 survey is highest yields of the year. Once ear weight and kernel counts.pod counts are taken into account we will see smaller yields. USDA is conservative on exports. The USDA is assuming a 6 mmt contraction in world grain trade, limiting their write up in exports."

U.S. Carryout

For the U.S. 2010-11 wheat carryout, the USDA estimates 952 million bushels vs. the average analysts estimate of 982 million bushels, and the USDA’s July estimate of 1.093 billion bushels. For 2009-10, the USDA estimated wheat carryout at 973 million bushels vs. the government’s July estimate of 973 million. 

For corn, the USDA estimated the U.S. 2009-10 carryout at 1.426 billion bushels vs. the average analyst estimate of 1.459 billion bushels and the USDA’s July estimate of 1.478 billion. USDA estimated the 2010-11 corn carryout at 1.312 billion bushels, compared to the average analysts estimate of 1.307 billion and the USDA previous estimate of 1.373 billion.

For soybeans, the USDA estimated the U.S. 2009-10 carryout at 160 million bushels, vs. the average analysts estimate of 166 million bushels and the USDA’s July estimate of 175 million. Also, the USDA estimated the 2010-11 U.S. soybean carryout at 360 million bushels, compared to the average analyst estimate of 334 million and the government’s July estimate of 360 million bushels.

World Grain Production

USDA estimated Russia’s 2010-11 wheat production at 45.0 million metric tons vs. 53.0 million bushels. 

Jason Ward, Northstar Commodity Investment Co. analyst, says the fact that USDA sees record crops of both corn/soy and carryouts decline is a little nerving. "Considering the fact that the corn crop has taken a turn for the worse since the data was collected on August 1, more flooding in IA and some extreme heat across some of the key growing states, this market has to factor this in."

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