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You've
heard the phrase, "the bulls need to be fed". Well,
further binge buying by the funds will be needed to sustain
prices at current levels or to achieve higher objectives.
Funds currently hold a record corn position of roughly 243,000
contracts. Profit taking and setbacks would not be
totally unexpected. In fact, it would be technically
healthy if we're to take the next leg up.
Going back to the report and switching commodities, let's
talk about soybeans. USDA adjusted last year's acres
down by 100,000 and the yield was dropped .3 bpa.
The crush was lowered a million, exports increased 3, seed
was up 1 and residual raised 10 million. This brought
05/06 carryout down 36 million to 448 million bushels.
For the 06/07 marketing year, USDA increased planted acres
700,000, increased harvested acres 600,000 and pushed yields
up 1 to 42.8 bpa. In other categories, the crush jumped
10, exports climbed 20 and residual gained 5 million bushels.
Ending stocks rose 25 million to 555 million. These
would be record ending stocks, if realized. World
stock rose 2.57 to a record 55.06 mmt.
US wheat carryout dropped more than expected to 418 million
bushels. USDA aggressively cut Australian wheat crop
projections leaving world stocks at 119.3 mmt, the lowest
in 25 years. Their crops will soon be harvested so
rains at this point won't help a lot. Regardless,
the market will continue to wait anxiously for production
results.
US wheat plantings are mostly complete. Some Soft
Red Wheat growing areas in the Eastern Corn Belt may not
get all the wheat they intended to plant into the ground
due to the wet weather. Otherwise, recent rains have
helped most areas of the Wheat Belt off to a good start.
USDA should have given us its first Winter Wheat crop conditions
report by the time you get this.
Typically, old crop tightness in wheat doesn't fully abate
until April. Look for the markets to remain firm until
sometime after the first of the year. This doesn't
necessarily mean highs are in either. Export business
must be well managed here in the States. Rather, setbacks
may not be too extreme until we hear official acreage numbers
and the market has a better handle on wheat conditions next
spring.
The markets have some serious work to do in order to supply
both US and world demands. Corn and wheat acreage
will likely see near record increases this coming year.
While soybean stocks are adequate now, they can not afford
massive acreage disappearance. It appears either soybeans
need to keep up or corn and wheat cool off. South
America remains a key factor. Current price levels
help but further market advancement will be needed to spur
additional plantings in the southern hemisphere.
Don't get caught asleep at the wheel. Marketing opportunities
happen at unpredictable times, like we're experiencing now.
It is not out of the realm of possibilities that highs for
the year are being set at this time. Who knows, things
change. How can selling $3 corn and $4.50 wheat be
wrong? These will help average up earlier sales and
are definitely good areas to start if you haven't already.
We're hoping for a break in the weather in order to get
all of your crops harvested. It's time you're paid
for all your hard work this past summer. Good luck,
and remember to give us a call if we can send a truck out
to help haul your grain to town.
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