USDA numbers & the trade
Grains last week made it look like the top has been placed in the market, with downside weekly reversals in corn and soybeans following up a week where wheat formed a downside weekly reversal. Yet, so far this week grains have recovered some of those losses, led by corn which has performed admirably after a limit down Friday last week, when USDA found 300 mb of corn in stocks from last year. Those additional stocks suggest that corn (and wheat) feeding were not very aggressive in the last quarter of last year, and that might have some negative impacts in the October USDA report.
While it appears the top has been placed, corn seems to want to hang on to its market gains, with the yield reports still coming in smaller than expected across the nation. It seems that while the soybean crop is likely to be a record large one, the corn for some reason just doesn't have the same yields in 2010. The season was a warm one, especially in late July and August. That seems to have put some stress on the corn crop, leaving it with a little less yield than expected in most areas across the country. While the crop is good, it's not great, and that seems to be keeping the market strong as we head into the heaviest part of harvest. Its likely that the majority of the US corn crop will be harvested in the coming 2 weeks, as weather is forecast to be ideal over the coming 2 weeks. The dry forecast is coming at the ideal time, when the brunt of the corn and soybeans are dry enough to be harvested. It could indeed be one of the earliest harvests on record, and with a decent crop as well. Pro Ag yield models are still holding up well, with corn at 165 bushels/acre (down 3 bushel since Sept. 1), while soybean yields are holding about steady at 44.8 bu/acre.
The harvest pressure might be felt more on the soybean crops in the coming weeks, as yields are going to be good, with USDA expected to hike the yield projection in the coming report Friday as soybean yields are better than expected. With the extra bushels expected to come in, it might be late in the harvest when the price feels the most pressure. Its also when sales are made due to the bins just getting full, and it's the time when people just give up and make sales. For 2010, these sales will be at pretty good price levels (although a terrible basis).
Weather has not only improved in the US, with dry weather over the soggy western and northern corn belt, but it also has improved in the FSU countries of Ukraine, Kazakhstan, and Russia. Wetter and cooler weather has dominated their weather pattern the past 3-4 weeks, with improving rainfall allowing winter wheat to be planted and germinated ahead of the winter period. This is allowing more acres to be planted than were originally expected, and that is exerting some pressure on grains as we head into fall and winter.