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BRIAN HOOPS

By Staff | Nov 5, 2010

CORN

Due to the smaller yield results and tightening balance sheets, the month of October was bullish for corn values as corn closed 86 1/4 cents higher.

Harvest is nearly completed in the majority of the Corn Belt as unseasonably dry conditions have allowed combines and fall tillage equipment to rapidly harvest this year’s crop and finish much of the fall fieldwork.

A higher quality crop has been harvested with producers reporting no drying costs associated with this year’s corn. Yield estimates continue to trend lower and the November supply/demand report will likely show a slightly smaller corn crop compared to a month ago.

Farmer selling will slow now that harvest is complete, basis levels will likely improve and the cash market should rally as it will be the only way to pry cash crop out of farmers hands with stronger basis levels throughout the winter. There is a huge demand base for corn, currently estimated at 13.03 billion bushels, is the largest on record.

With the huge demand base and corn now locked away in farmer storage, the corn market will need to bid for acres this spring to rebuild the ending stocks at a more comfortable level. In November, weakness in prices will be used as a buying opportunity for end users.

SOYBEANS

Due to the smaller yield results and tightening balance sheets, the month of October was bullish for soybean values as soybeans closed $1.19 1/4 cents higher.

Harvest is nearly completed in the majority of the Corn Belt as unseasonably dry conditions have allowed combines and fall tillage equipment to rapidly harvest this year’s crop and finish much of the fall fieldwork. Yield estimates continue to trend lower and the November supply/demand report will likely show a slightly smaller soybean crop compared to a month ago.

Farmer selling will slow now that harvest is complete, basis levels will likely improve and the cash market should rally as it will be the only way to pry cash crop out of farmers hands with stronger basis levels throughout the winter.

Demand for U.S. soybeans is forecast to be record large. The huge demand base for soybeans, estimated at 3.17 bb, comes in the form of strong export demand and increased consumption of oil for soy bio-diesel usage. Ending stocks are forecast to remain very tight at 230 million bushels. This is only 25 mb larger than last year at this time, despite a record large soybean production.

Demand is outpacing last year’s record export pace, indicating this year’s export profile is front end loaded. The market will be anticipating a record soybean crop in South Amer- ica and updates on this year’s production from South America will be a major driving force for prices throughout the winter.

Weather during the South American growing season will be closely watched. Like corn, soybeans too should bid up for acres this spring.

WHEAT

Led by corn and soybean advancing and lower than expected winter wheat ratings, Chicago wheat managed to close 43 1/4 cents higher in the month of October. While demand is also a major driving force for wheat prices, a smaller winter wheat crop could be a bullish supply development that could send wheat prices soaring.

Foreign countries continue to be strong buyers of wheat for food, and with Russia out of the export market, U.S. wheat exports are nearly 50 percent higher this year compared to one year ago at this time.

While the winter wheat seedings in the Plains States are similar to the average pace, the good-to-excellent ratings are only at 47 percnet g/e on the crop that has been seeded, down 18 percent from last year’s crop ratings.

Ample moisture across the key winter wheat growing states like Kansas, Oklahoma and Texas will be needed to im- prove crop ratings before wheat goes into dormancy by the end of November. Unless crop ratings improve, the market will fear farmers will destroy the winter wheat crop in the spring and plant corn and soybeans instead, making the winter wheat crop that much smaller, which will be a bullish development for prices.

Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.

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