Markets Mixed Prior to the Report on Wednesday.
Aug 10, 2009
Last week’s unemployment statistics got the stock market fired up that the recession was ending. This lead to a strong dollar bounce which has seen follow-through today. Subsequently most of the commodities are still giving back much of the recent gains on dollar weakness. On top of all the outside market influences, there were good rains over the weekend with the heat. The feeling is corn conditions are going to continue to show better than normal seasonal positive improvement. While it is only antidotal evidence, I went for a quick trip down to northern Missouri, back up through southern Iowa and back to Indiana this weekend [about 900 miles in total]. I saw nothing to change my mind that corn yields are going to be strong. Soybeans however were a little different. Granted there were some great looking fields but also some very small beans. Bottom line: We are going to need all the good weather we can get in August and September to get the beans to produce a yield above 42 bu. in my opinion.
Looking forward to the USDA Supply and Demand report out this Wednesday, I believe going in everybody has a 157 bu./acre corn yield and 41.5 bu./acre bean yield factored in to the report. As for planted acres, beans will be up slightly and corn acres down around a million acres. So the final question will be demand prospects. I have to believe with the continued decline in livestock prices, feed usage is going to start taking a hit. The best one can hope for is ethanol demand to stabilize around 4.1 billion bushels of corn so overall demand merely holds demand expectation levels. I believe corn carryover is going to move eventually above 1.8 billion bushels and bean carryover above 250 million bushels. It should be very difficult getting lead month corn above $3.40 and beans above $10.50 once harvest starts until well into 2010.
Bottom line: Barring a ”major early freeze” the crops are going to be out there and prices are going to stay under a lot of near term price pressure. Use rallies to sell the carry that exists for corn and beans.
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