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Market rewards bullish report

CHICAGO, Illinois ( USDA's bullish August Crop Production and Supply/Demand Reports Thursday helped the CME Group farm markets close sharply higher Thursday.

The Dec. corn futures contract settled 25 1/2 cents higher at $7.14. The Nov. soybean contract ended 30 1/4 cents higher at $13.31 3/4. The Sep. wheat futures closed 16 1/4 cents higher at $7.01 1/4. The Sep. soybean meal futures contract closed $8.10 per short ton higher at $353.70 and Dec. soyoil futures ended $0.98 higher at $54.58.

In the outside markets, the NYMEX crude oil is $1.88 per barrel higher, the dollar is higher and the Dow Jones Industrials are up 355 points.

Because of disappointment from not returning to 'limit up', the corn market sold off, on the close, one floor trader says.

On Thursday, the USDA lowered the U.S. 2011 average corn yield to 153 bushels per acre, five bushels below its July estimate. The soybean yield was lowered to 41.4 bushels per acre. Both estimates served as the impetus for positive farm markets.

Joe Bedore, FC Stone Inc.'s CME Group floor trader says the foundation has been laid for a smaller U.S. 2011 corn crop.

"The yield is going south and the market is headed north. People now believe the average U.S. corn yield may be 150 bushels per acre. I've heard estimates as low as 145," Bedore says. 

Because the market wasn't able to close 'limit up', the corn market may have a down day Friday, Bedore says. "In the long run, a down day doesn't matter, because this new foundation tells us we don't have a big crop.

Going forward, all eyes are on crop-weather, traders say. However, interestingly enough, a lot of people think the corn crop story may be nearly over. For soybeans, August remains a critical weather month for crop development. 

"Although some people say the corn kernels can still fill out and raise this crop size. My guess is the story is over and we are going to have a smaller crop," Bedore says.

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