Quarterly Stocks Figures Bullish Wheat; Bearish Corn, Beans

A mixed to lower start is likely this am, down roughly 10 or more in beans, steady corn and wheat. Crude oil is higher this am but so is the $, sending mixed signals to our grain market. Chinese markets remain closed all week for their autumn festival holiday.

The USDA quarterly stocks numbers were bullish wheat at 1.857 billion bushels but bearish corn and, especially beans at 1.624 billion and 205 million, respectively. The bean number was much higher than expected due to the USDA revising 2007 bean production higher by 91 million bushels to 2.676 billion bushels. Wheat production showed mixed results with all wheat production 2.500 billion bushels, all winter wheat 1.868 billion, hard red winter 1035 billion, soft red winter 614 million, white 219 million, spring 547 million and durum 85 million. The all wheat and spring numbers were higher than expected while most of the other numbers were about as expected.

The weekly crop rating showed corn maturity was still way behind normal at 52% vs 79% average. Bean maturity was 68% vs 81% average. Corn and bean harvesting were well behind normal, 9% vs 21% average for both.

Deliveries this am were much larger than expected, 540 meal and 4200 oil. Dreyfus put out 300 of the meal. These larger than expected deliveries could pressure the nearby spreads in these pits today.

FC Stone puts out their Oct crop production guesses tomorrow am.

Much needed rain is possible in Argentine wheat areas tonight through Friday. Beneficial rain is possible in parts of Australia's wheat belt later this week, mainly New South Wales. Lows the next couple of mornings in the midwest US could fall to freezing levels but little damage is expected as only a light freeze, if any, is likely.

Mostly favorable harvest weather is forecast for the midwest this week. The 6-10 day forecast calls for warmer temps with wet weather in the west and below normal rain in the east. Good harvest weather is forecast for the delta the next 5 days or longer. ---Vic Lespinasse

Bearish Factors May Keep Grains Under Pressure All Day

A lower to sharply lower start is expected following big overnight losses as financial turmoil continues to rack all the markets, including commodities. Crude oil is sharply lower and the $ is very strong, a bearish combination for the grain market. Malaysian palm oil fell 188 ringgit today. The Dalian, China grain futures market is closed all week for their annual autumn festival. The early call is 15-20 lower wheat, 15 down in corn and 30 lower beans.

Much needed, very beneficial rain with high coverage fell in western Australia over the weekend, up to 1.25". More is forecast today, up to .75". Mostly dry weather is forecast after today for the rest of the week. Argentine wheat areas had up to 1.5" of rain over the weekend in parts of the belt. More rain is still needed, however, especially in western parts of the belt. Dry conditions are forecast today through Wednesday with rain returning Thursday.

The US delta enjoyed good harvest weather over the weekend and more of the same is expected this week. The southwest winter wheat belt was mostly dry this weekend and a similar weather pattern is likely this week. The midwest was dry over the weekend. Up to .75' fell in parts of the western half of the belt overnight but dry weather is now forecast today through Saturday. The eastern half of the belt will see up to .75' scattered today and tomorrow with dry conditions Wed-Sat. The 6-10 calls for warmer and drier than normal weather. There is no freeze threat in the outlook for this week or next according to this morning's forecast.

The USDA quarterly stocks and final 2008 wheat production reports will be out tomorrow 7:30am US Central time. The weekly crop progress report this afternoon will probably show bean harvesting way behind its roughly 20% average pace for this time of year. Corn is likely to be way behind its roughly 20% average pace for this time of year also. FC Stone will put out their October crop production estimates Oct 1, followed by the USDA Oct 10.

This overall bearish weather picture and the bearish signals from the outside markets, responding to widespread financial turmoil, should keep grain prices under strong pressure all day today. ---Vic Lespinasse

Trepidation in Outside Markets May Affect Grains

A lower start is likely this am, around 10 in wheat, 5-7 corn and 1-3 beans. The outside markets are sending mixed signals to the grains this am with crude oil and the $ both lower while the Dalian, China grain futures market is mixed.

There is a good deal of trepidation in all the markets today with the $700 billion bail out deal stalled in Washington. Traders will be watching for developments in this situation today and depending on how things turn out, the equity and commodity markets, including grains, will respond. If no deal is reached, this would probably be bearish for most markets, including grains. If a deal is achieved, this might have a supportive influence on the grain market.

Much needed rain is forecast the next few days in Argentine wheat areas but amounts and coverage are uncertain. West Australia will continue to benefit from rain today with up to 1" falling there so far. However, dry weather will return after tomorrow while the rest of the Australian wheat belt remains dry for the next several days or longer. In general, more rain is needed in both Argentina and Australia soon to prevent a further decline in wheat production prospects.

Generally favorable harvest weather for corn and beans in the midwest is expected to continue the next several days. Light, scattered rain is forecast in the western half of the belt this weekend into Monday. Dry weather is forecast Tue-Wed. The eastern belt will be mostly dry the next 3 days with light, scattered rain forecast Monday-Tuesday. A frost is possible in the northern part of the belt Wed-Thur. Good bean harvesting weather is expected to persist in the delta the next week or longer. The southwest winter wheat belt will enjoy favorable planting weather the next week or so.

FC Stone will put out their October crop production estimates Oct 1. ---Vic Lespinasse

Mixed Signals from Outside Markets to Open Grains

A lower start is expected today, 3-5 wheat, 5-7 corn and 10 beans. The outside markets are sending mixed signals to the grains this am with crude oil and the $ both lower.

The Census Bureau August crush was as expected, 128.7 million bushels with oil stocks also in line, 2.589 billion lbs. Meal stocks were much larger than trade guesses, 413,000 short tons. Weekly export sales (000 omitted) were slow for wheat, 284 tonnes. Corn was in line, 548 tonnes, as were beans, 612 tonnes and oil, 6000 tonnes. Meal sales were slow, a total of 62 tonnes between the old and new crop years.

Egypt bought 120,000 tonnes of Russian wheat but nothing from the US. Some traders were hoping the US would capture some of this Egyptian business because ocean freight rates have fallen sharply recently, making US grain exports cheaper to distant destinations than previously.

There is a good chance for good rains in western Australian wheat areas the next couple of days but mostly dry weather is likely after that, keeping the outlook for a big Australian wheat crop this year in doubt. Scattered rain is forecast in parts of the Argentine wheat belt the next few days, especially over the weekend when up to 1 1/4" could fall over up to 70% of the area. Of course, one rain doesn't make a crop so more rain wll be needed again soon to ensure favorable growing conditions.

The US delta will enjoy at least 5 more days of good bean harvesting weather. The midwest saw isolated rain yesterday with light rain possible today through Monday in the west while the east remains mostly dry. Light rain is likely in the east early next week. The two main weather models diverge in their outlook about a week to 10 days from now with the US model calling for much colder temps and a possible frost in the northern part of the belt while the European model predicts much wetter conditions during this time. Either way, corn and bean harvesting should pick up soon, which could bring harvest pressure to bear on the market. ---Vic Lespinasse

Limited Commentary Today

Vic Lespinasse's Daily Grain Commentary will be delayed today while Vic is being interviewed by Orion Samuelson for This Week in AgriBusiness.

Visit the program website for broadcast and video information.

Outside Markets May Weigh on Grains Today

A lower start is expected in all pits, 2-4 wheat, 3-4 corn and 20 beans. Crude oil is lower and the $ higher this am, a bearish combination for the grains.

The weekly crop ratings report yesterday after the close showed corn maturity way behind normal, as expected. Only 33% of the corn crop is mature vs 63% average. Beans dropping leaves, a sign of maturity, were only 44% vs 64% average. Corn harvesting reached just 5% vs 14% average. There was no national number for bean harvesting yesterday as midwestern bean harvesting has barely started. Winter wheat planting is 22% done vs 30% average.

The forecast remains favorable for late developing corn and beans with warm temps and little rain in the picture. There is no threat of freezing temps in the belt for the next week. Light, scattered rain fell in parts of the western corn belt yesterday while the east was dry. More scattered, light rain is forecast in the west today with dry weather tomorrow through Sunday. The east is expected to be dry today through Sunday. Warm temps are predicted across the belt during this time. The 6-10 day calls for warm temps in the west with below normal rain while the east could see below normal temps and above normal rain. The delta is forecast to remain warm and dry the rest of this week through the weekend, allowing bean harvesting to pick up.

Argentina's drought-stressed wheat belt could see some much needed rain Saturday and again early next week. Beneficial rain fell yesterday in New South Wales state in Australia. A light freeze hit wheat in western Australia yesterday but beneficial rain is forecast there later this week.

Crude oil and the $ gave a huge boost to the grains yesterday but today they are likely to weigh on grain prices. Traders will continue watching these outside markets for direction in the grain market. Treasury Secretary Paulson will testify today before a Congressional committee and depending on what he says the $ and crude oil will react, which could then impact the grains so keep an eye on Paulson's testimony today also. ---Vic Lespinasse

Inflation Concerns and Weather May Push Grains Higher Today

A sharply higher start is likely this am, roughly 15 in wheat, 10 corn and 30-35 beans. Crude oil is up triple digits this am, although it has backed off sharply from its early highs, the $ is lower and Dalian, China grain futures were sharply higher today, Malaysian palm oil gained 85 ringgit and gold is much higher, all amid growing inflationary expectations resulting from the huge US government bailout program, $700 billion or more.

All the rest of the news this am is weather: Scattered rain fell in parts of the eastern corn belt over the weekend but mostly dry weather is forecast there this week. The western half of the midwest was mostly dry over the weekend but scattered rain is likely there the first half of the week, up to .6". Warm temps are predicted for the entire belt this week. The US weather model calls for a freeze in the midwest around Sep 30 or Oct 1, which could do some serious damage to corn and beans as they are well behind normal in maturity. The European weather model does not predict any freeze at that time but just the fact one of the major weather models is calling for a freeze could provide some underlying support for corn and bean prices today.

The weekly crop progress report this afternoon could show corn and bean harvesting. Average for this time in the season is around 13% for corn and 8% for beans but if there are harvest numbers reported this afternoon they are likely to be way below these averages. The delta will see warm, dry weather this week into next, allowing for rapid bean harvesting. Similar weather is forecast in the southwest winter wheat belt this week into next.

Dry weather is forecast for the already drought stressed Argentine wheat belt the next 7 days. Much needed moderate amounts of rain are predicted in Australia’s New South Wales state early this week with light rain forecast in western Australia later in the week, which will also be very welcome. These two areas are the top two wheat producing regions in Australia, accounting for over 2/3 of the crop. New South Wales state issued a report saying their wheat production prospects deteriorated due to dry weather conditions much of the season so far.

Bullish Influences May Drive Grains Today

A higher start is expected in all pits this am, 10 wheat, 5-10 corn and 10-15 beans. The $ is higher, which is bearish for grains but crude oil is sharply higher, a bullish influence for grains. Also, US treasury bonds and notes are sharply lower this am, possibly reflecting inflationary worries arising from the government bailout plan for banks, details of which have yet to be announced. Treasuries are strongly signaling inflation this am and inflation, by definition, is bullish for commodities, including grains.

It hasn't been officially announced yet but Argentina almost certainly has cut off corn exports and some analysts say they will remain cut off until Feb or March, which would be bullish for US corn exports and prices. Argentina is the second largest corn exporter in the world after the US.

Russia's agriculture minister is predicting a grain crop of 95-100 million tonnes this year but many private guesses are over 100 million vs just 81.8 million last year. Exports are expected to total around 20-25 million, much higher than last year also.

Monsoon rain will maintain favorable conditions in northern and central Indian grain areas the next several days. Only minor rain is forecast in the already too dry Argentine wheat belt the next 7 days, increasing stress on the crop there. Mostly just light, scattered rain is forecast in the Australian wheat belt the next 7 days with the best chance of significant moisture in northern New South Wales, the 2nd largest wheat producing state in the country.

There is no freeze threat for the midwest for the next 10 days with warm temps expected to prevail. The corn belt was dry the last 24 hours and more of the same is forecast until next week. Light, scattered rain is forecast for the western corn belt the first half of next week with this moisture moving into the western half of the belt the second half of next week. The 6-10 day calls for warm temps with above normal rain in the northwest and below normal rain in the southeast. Good bean harvesting weather is forecast in the delta the next week with only light, isolated showers every few days.

Keep an eye on crude oil for early guidance in the grains this am as the grains and crude oil were in lockstep yesterday am.

Bullish Outside Markets; Bearish Weather Bring Volatility to Grains Today

A higher start is expected in all pits, about 10 in wheat, 3-5 corn and 10-12 in beans. Dalian, China grain futures were mixed but crude oil is much higher and the U.S. Dollar is solidly lower, a bullish combination for the grains. Gold is sharply higher again this am, which could also lend support to the grains.

Weekly export sales were good for wheat, a net of 632,000 tonnes between the old and new crop years. Soybean meal was also good, a total of 131,000 tonnes between the two crop years. Soybean Oil was good, 10,500 tonnes, while beans were in line, 411,000 tonnes. Corn was slow, just 304,000 net between the two crop years.

Argentina announced they are closing their corn export registry, which will shut off corn exports from this country, to "safeguard domestic supplies." If this export ban lasts for a week or more, which is likely, it will boost US corn export prospects, which is friendly for our corn market. China's agriculture minister said China will have another record grain harvest in 2008, the 5th year in a row for higher output.

Favorable monsoon rains are expected to continue in India, boosting crop prospects there. Rain is possible in western and northern Argentine wheat areas tonight into tomorrow but more widespread rain is needed to offset the ongoing dry weather pattern that is stressing the crop there. Early next week rain is expected in New South Wales, Australia's second largest wheat state, but only very light rain is forecast elsewhere in Australia's wheat belt the next 7 days, increasing drought stress on the crop.

The U.S. Midwest has no freeze threat the next week or longer as warm temps are to prevail, allowing corn and beans to continue late season development. The Midwest was dry the last 24 hours and will stay this way today through about Monday. The 6-10 day calls for warm temps with above normal rain in the west and below normal in the east. Good harvest weather is forecast to continue in the delta the next week or so, allowing bean harvesting to pick up.

The CME Group is letting AIG get out of long grain positions through block trading. Yesterday, 7260 contracts of wheat, 13,741 corn, 6325 beans and 4235 oil have been block traded, presumably all for AIG. I don't think this is having much impact, if any, on prices as they are in effect just transferring positions from AIG to other firms, not selling the contracts into the market.

The outside markets are bullish but the weather is bearish, at least for corn and beans, which could cause some volatile trading today. ---Vic Lespinasse

Easing Turmoil in Financial Markets Taking Pressure off Grains

A higher start is indicated in all pits, roughly 15-20 in wheat, 5-7 corn and 10-15 beans. Dalian, China grain futures were down today but they were probably just reacting to our losses yesterday. Crude oil is higher this am while the $ is lower, a bullish combination for our grain market.

All the turmoil in the financial markets seems to have subsided a bit overnight with the Fed agreeing to bail out AIG. This should take a lot of pressure off the grain market. Of course, the situation is fluid and any change could cause a significant reaction in all the markets so traders need to be watchful. The CME announced AIG is being allowed to reduce the long positions in grain and livestock futures of their DJ-AIG index fund by the use of block trades with two other index funds. Block trades are off-exchange trades. The DJ-AIG index fund had about $55 billion in assets at the end of June, making it the second largest index fund in the business behind SP-GSCI. It is not expected these block trades will have any impact on the grain or livestock markets today.

Weather: Mostly warm, dry conditions are forecast across the midwest, delta and southwest the rest of this week and over the weekend, allowing corn and beans to continue developing without any freeze threat in the midwest while delta bean harvesting speeds up. The 6-10 day calls for above normal temps in the midwest with below normal rain in the east and above normal rain in the west. The delta is expecting below normal rain during the 6-10 day period, which should allow for continued rapid bean harvesting.---Vic Lespinasse

Grains May Follow Crude Oil Lower Today

Another lower start is indicated in all pits this am, 5-10 in wheat, 7-10 in corn and 20 in beans. Crude oil is sharply lower again this am, as are grain prices at the Dalian, China futures market. The $ is about unchanged while Malaysian palm oil fell 172 ringgit today. One can expect more pressure from these outside markets today, especially if crude oil remains sharply lower again.

The weekly crop ratings yesterday afternoon showed corn and beans both unchanged from the previous week in the good to excellent catagories, 61% and 57%, respectively. Development remains well behind normal with only 19% of the corn crop mature vs 44% average and just 21% of the beans dropping leaves, a sign of maturity, vs 41% average. Winter wheat planting is off to a slow start with 11% done against 16% average.

ABARE, the Australian version of the USDA, cut their wheat crop guess to 22.5 million tonnes vs 23.7 million previously. They warned further cuts are likely unless improvement is seen in rainfall which has been spotty the last several months.

Rain is still expected Thur-Fri in at least some parts of the very dry Argentine wheat belt, where it will be very welcome. Warm and dry weather in the Canadian prairies the next 5 days should allow late crop development and harvesting to proceed.

Meteorlogix Weather says the corn belt was mostly dry the last 24 hours. They forecast warm and mostly dry weather over most of the belt the rest of this week with the 6-10 day calling for more of the same. This is ideal for further crop development with no current threat of any freezing temps. The delta will also enjoy warm and dry weather the rest of this week with the 6-10 day calling for more of the same, allowing for harvest activity to finally speed up after its very slow start this season.


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Turmoil in Financial Markets May Hit Grains Today

A lower to sharply lower start is indicated this am, roughly 5-10 down in wheat, 10-15 lower in corn and 30-35 off in beans. The turmoil in the financial markets could have a major impact on the grains today so keep a close watch on them. Crude oil is sharply lower, below $100 a barrel for the first time in months, while the $ is sharply higher, a bearish combination for the grains. Malaysian palm oil fell 140 ringgit today, which is bearish for our bean oil market.

Heavy rain fell in parts of Missouri and Illinois over the weekend from the remnants of Hurricane Ike, flooding some areas with up to 7" of rain. Lesser amounts were seen elsewhere in the midwest while up to 1.5" fell in parts of the delta and in the eastern half of the southwest winter wheat belt. This rain was welcome in the southwest as fall winter wheat planting time is approaching. The good news is that mostly dry weather will be the rule this week in the midwest and delta, allowing fields to dry out and harvesting to proceed. The 6-10 day forecast for the midwest doesn't foresee any freezing temps, in fact above normal temps are forecast, which should allow corn and beans to continue developing.

Indian oilseed areas benefited from weekend rains which ended a dry spell in some areas there. Rain was scattered in the Australian wheat belts over the weekend, especially the dry western half of the belt, with up to 1". More is likely this week in the west with mostly dry weather in the east. The rain in the west was badly needed and very beneficial for the wheat crops there. Significant rain is now forecast in the very dry Argentine wheat belt later this week.

The National Oilseed Processors Assoc. August crush was around 12 million bushels below trade ideas, just 121.7 million bushels. Oil stocks were roughly 100 million lbs less than expected as a result of this much lower crushing rate, only 2.152 billion lbs.

Keep an eye on the outside markets today, especially the financial markets, as they could heavily influence our grain markets. ---Vic Lespinasse

USDA Crop Report: Mostly Bullish

A higher start is likely in all pits this am, roughly 20-25 beans and 5 in corn and wheat. The USDA numbers were mostly bullish, crude oil is higher, the $ is lower and the Dalian, China grain futures market was higher, all supportive influences for the market this am. Sep futures go off the board at noon today, US Central time.

The USDA crop report was bullish with the corn crop guessed at 12.072 billion bushels and beans 2.934 billion, both below trade averages. The yield estimates were also below expectations, 152.3 bushels per acre in corn and 40 in beans. Carryover estimates where higher than expected for the 2008-09 crop in wheat, 574 million bushels. Corn was less than expected, 1.018 billion and beans, 135 million. Oil ending stocks were also below trade guesses, 2.335 billion lbs. World carryover stocks were put at 139.2 million tonnes, above the August guess of 136.2 million. Corn was put at 109.9 million vs August 112.4 while beans were put at 51.2 vs August 49.3. The USDA cut southern hemisphere wheat production 4 million tonnes but increased northern hemisphere production over 4 million.

ABARE, the Australian version of the USDA, will estimate their wheat crop Tuesday.

There is still no freeze threat in the midwest the next 10 days or so. Up to 1" of rain was scattered over the midwest the last 24 hours. The forecast calls for more rain the next few days, possibly heavy in the southern part of the belt from the remnants of Hurricane Ike. This late season moisture will be of marginal benefit to still developing crops. Some areas could see over 3-4" of rain from Ike which could cause some local flooding problems. Heavy rain is forecast this weekend, up to 6", in parts of the delta, such as Arkansas, from the remnants of Ike. This will further delay bean harvesting in this area, already way behind normal, and provide more support for the cash bean and meal market as supplies tighten even further.

Beneficial rain is likely over coming days in northern New South Wales, Australia’s the second largest wheat-producing region. Only very light rain is forecast the next 7 days elsewhere in Australia, increasing stress on the wheat crop, especially the already dry western region, the largest wheat-growing area. No Argentine wheat belt rain is forecast the next week or so and then only light rain is indicated by the latest forecast. This will further stress the drought-stressed crop there.

Beneficial rain is predicted in the US southwest winter wheat belt today and tomorrow, up to 2", favoring the eastern half of the belt, after up to 4" of rain fell in this region yesterday. This moisture will help build soil moisture supplies ahead of fall wheat planting. ---Vic Lespinasse

Link to the report

From the USDA Report:
Corn Production Down 2 Percent from August Forecast
Soybean Production Down 1 Percent

Corn production is forecast at 12.1 billion bushels, down 2 percent from last month and 8 percent below 2007. Based on conditions as of September 1, yields are expected to average 152.3 bushels per acre, down 2.7 bushels from August but 1.2 bushels above last year. If realized, yield will be the second highest on record, behind 2004, while production will be the second largest, behind last year. Yield forecasts are lower than last month across the northern and eastern Corn Belt and the Ohio and Tennessee Valleys where the lack of rainfall during August reduced soil moisture supplies and stressed the crop. Yield prospects also decreased across much of the middle Mississippi Valley and adjacent areas of the Great Plains as dry weather during August eliminated soil moisture surpluses.

Soybean production is forecast at 2.93 billion bushels, down 1 percent from the August forecast but up 13 percent from last year. If realized, this will be the fourth largest production on record. Based on September 1 conditions, yields are expected to average 40.0 bushels per acre, down 0.5 bushel from last month and down 1.2 bushels from 2007. Compared with last month, yields are forecast lower or unchanged in the mid-Atlantic States, the central and eastern Corn Belt, Louisiana, Nebraska, and South Dakota. Yields increased or are unchanged from the August 1 forecast across the Southeast and the remainder of the Great Plains. Area for harvest in the U.S. is forecast at 73.3 million acres, unchanged from last month but up 17 percent from 2007.

Lower Start Anticipated Ahead of Tomorrow's Crop Report

A lower start is indicated this am, down roughly 7-10 wheat, 2-3 corn and 1-3 beans. The $ is slightly higher while crude oil is slightly lower, a little negative for the grains.

Japan bought 107,000 tonnes of US wheat at their weekly tender.

According to news reports this am, the CFTC report on the unprecedented run up of prices in the energy market does not blame speculators, saying it was due to a major increase in demand from developing countries, especially China and India. The head of the CFTC will testify to this effect before the House Agriculture committee today. The CFTC said the same thing in July but, it being an election year, lawmakers are looking for a scapegoat and speculators are always an easy target. Hopefully, they will listen to the CFTC this time and end their witch hunt.

More analysts are cutting their Australian wheat crop estimate, the latest today being Rabobank and Pro Farmer, now at 20.9 million tonnes and 22.7 million, respectively. Previously, they were 22 million and 24.5 million, respectively. Rain is badly needed in western Australia, the largest wheat growing area in the country with New South Wales the second largest producer. The forecast calls for beneficial rain in New South Wales over coming days but only very light rain elsewhere for the next 7 days, including western Australia.

Argentina's dry wheat belt will stay that way with no rain forecast until next Thursday. The remnants of Hurricane Ike could drop heavy rain in the delta starting about Sunday, slowing harvesting of beans there.

There is still no freeze threat in the US midwest the next 10 days. Scattered rain fell in the western half of the belt yesterday. The forecast calls for up to 1.5" of rain in the west between today and Saturday with rain in the east Fri-Sun, up to 1". The 6-10 day calls for warmer and drier than usual conditions for the belt.

Weekly export sales were good for wheat, 457,000 tonnes, and beans, 460,000 tonnes. Meal was about as expected, a total of 83,000 tonnes between the old and new crop years. Corn sales were slow, just 376,000 tonnes and oil sales were poor, just 400 tonnes between the old and new crop years. A total of 2.578 million tonnes of corn and 888,000 tonnes of bean sales were carried over from the old crop year, ended Aug 31, to the new crop year, which started Sep 1.

Whatever happens today, it will likely be forgotten when the closing bell rings as attention will be focused on tomorrow morning's USDA Sep crop report. ---Vic Lespinasse

Mixed, Mostly Weaker Open in Grains Anticipated

A mixed, but probably mostly weaker, start is expected this am, down 1 in corn and down 2-4 in beans. The latest wheat call is steady/mixed following the bearish Stats Canada numbers but this is tentative, depending on what Egypt does this am. Dalian, China grain futures were a shade better with the exception of palm and bean oil, which were lower. Crude oil has been trading back and forth around unchanged this am. It won't have much influence on the grain market today unless it makes a big move one way or the other. The $ is higher this am, a negative background factor for the grains.

Stats Canada's July 31 grain stocks numbers were negative with all wheat 4.8 million tonnes, durum 842,000 tonnes, oats 975,000 tonnes and canola 1.54 million tonnes. All these numbers were higher than expected with the exception of durum.

Traders are awaiting results of Egypt's wheat tender this am, which should be known before the grains open. Depending on how much, if any, US wheat Egypt buys this could impact the opening in this pit.

A private forecaster in Australia cut his wheat guess from 24 million tonnes last month to 22.6 million tonnes today due to very dry weather during August. Meteorlogix Weather is the only forecaster I have seen so far this am but they do not have an updated weather forecast for Australia yet. Recent rain in parts of the Australian wheat belt helped stabilize conditions there but more rain will certainly be needed or prospects for the crop will fall further. Traders expect the USDA to cut its 25 million tonne Australian wheat crop guess this Friday morning as most guesses are in the 21-23 million tonne area.

China's government linked think tank, the National Grain and Oils Information Center, left their 2008 corn crop guess unchanged at 156 million tonnes and their bean guess unchanged at 17.5 million. The USDA August guesses were 153 million tonnes for corn and 16 million for beans. France's ONIGC, their version of the USDA, upped their 2008 wheat guess from 36.8 million tonnes last month to 37.4 million today.

Weather according to Meteorlogix: The European model has no midwestern freeze threat the next 10 days but the US model brings cold Canadian air much further south during this time. Meteorlogix is going with the European model.The midwest was mostly dry the last 24 hours. Up to 1" of rain is expected to move across the midwest between tonight and Saturday with more possible early next week. The 6-10 day calls for wet weather in the southeast part of the belt, below normal rain elsewhere.

Favorable growing conditions are forecast to continue in the main Chinese growing areas. No significant rain is forecast for Argentina's wheat belt the next 7 days, further stressing the already dry wheat crop. I am not a weather man but, just wondering here, what if the dry weather in the Argentine wheat belt, where it is early spring, were to spread to other areas of Argentina and what if this drought were to spread to Brazil? This would be very bullish for our wheat, corn and bean markets.

Friday is the last trading day for Sep futures. ---Vic Lespinasse

Outside Markets Pointing Lower for Grains Today

Vic reports from the CBOT floor throughout the trading day.
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A lower start is expected across the floor, 15 in wheat, 10 in corn and 25 in beans. Malaysian palm oil fell 115 ringgit today. Dalian, China grain futures were sharply lower today. Crude oil is sharply lower today ahead of the OPEC meeting, which starts early this afternoon by US Central time in Vienna, Austria. Traders will be watching for any OPEC policy changes but it now appears OPEC will continue with the status quo. The $ is steady currently. Most of these outside markets are pointing lower as far as our grain market is concerned.

Weekly crop ratings were unchanged for corn and beans in the good to excellent categories yesterday afternoon, 61% in corn, 57% in beans. Traders were expecting unchanged to a 2% decline. Crop development remains way behind normal: Beans dropping leaves 10% vs 21% average; corn mature 11% vs 28% average. Spring wheat harvesting is almost done, 87% complete vs 90% average.

The EU wheat market touched a 14 month low today. Stats Canada will put out July 31 grain stocks guesses tomorrow, 7:30am US Central time. I listed trade estimates yesterday and I will repeat these guesses later today. On October 2, Stats Canada will estimate Canadian grain production.

The USDA attache in Beijing is now guessing 2008-09 Chinese bean imports at 38 million tonnes vs the current official USDA guess of 36 million from the August crop report. Last year, Chinese bean imports totaled 35.5 million tonnes. It will be interesting to see what number the USDA uses for China this Friday when they put out their Sep crop report.

USDA Secretary Ed Schafer said yesterday the USDA and the EPA will announce a new biofuels plan in a few weeks. He thinks ethanol producers are too dependent on government subsidies and wants to reduce them, making more policy decisions market dependent instead of government determined.

Argentine wheat areas will suffer from ongoing dry weather the next 7 days. Rain is likely to return to Indian oilseed areas the next few days, where it will be very welcome. Favorable late season weather is forecast in the main Chinese growing areas the next few days.

Temps in the upper 30's were seen in northern Iowa this am but there is still no credible freeze threat for the midwest the next 10 days, according to Meteorlogix Weather. Hurricane Ike is currently expected to head mostly west across the Gulf and hit southern Texas, sparing the delta a direct hit. Drier weather is likely to speed late spring wheat harvesting the next 10 days. The US midwest saw scattered rain the last 24 hours. Mostly dry weather is likely the next 2-3 days wth rain returning Thur-Sat, up to 1". The 6-10 day calls for wet weather in the southeast part of the belt, below normal rain elsewhere wth warmer temps. This outlook is highly tentative due to Ike, however.

Sep contracts expire at noon, Friday, US Central time.---Vic Lespinasse

Fed Takeover of Mortgage Giants May Affect Grains

A slightly higher start is expected in most pits this am. Some traders are pointing to the government bailout of Freddie Mac and Fannie Mae as bullish for commodities as it could calm things down in the credit market. This could be true but the $ is strong this am, maybe connnected to the bailout, and this is a bearish influence for the grain market. Crude oil is very strong this am but the Dalian, China grain futures market is mixed so overall the outside markets are sending mixed signals to our grain market.

Iraq is in the market late this month for 50,000 tonnes of optional origin wheat but they could take a much larger amount, if they buy anything. The 11-day old Argentine truckers strike is over, at least for now. This strike didn't affect our grain market anyway.

Argentina's wheat belt is likely to remain mostly dry the next 7 days, increasing stress on the developing wheat crop. Australian wheat benefitted from rain late last week in the large wheat-growing area of northern New South Wales, up to 2". Beneficial growing conditions are forecast to continue in the main Chinese growing areas the next several days. Mixed conditions are forecast for Indian oilseed areas the next several days.

Meteorlogix says there is no significant risk of freezing temps in the midwest the next 10 days and that it is too early to tell if Hurricane Ike will bring rain to the eastern corn belt early next week. Of course, by then rain will be of little benefit to the crops. Generally dry weather is forecast for the US delta the next several days, allowing bean harvesting to proceed in areas that aren't still too wet from the last hurricane. Ike could strike this area later this week, which would halt harvesting again. The midwest had light, scattered rain over the weekend, up to .75". More scattered rain is forecast today, up to 3/4", with a couple of days of dry weather before possible showers move back into the belt the second half of this week. The 6-10 day calls for wet weather in the east and below normal rain in the west but a lot depends on the movement of Hurricane Ike.

The big USDA crop report is out Friday am and this could impact the market very strongly that morning. ---Vic Lespinasse

More Losses in Grains Possible Today

A sharply lower start is expected this am in all pits, roughly 20-25 in wheat, 12-15 in corn and 35-40 in beans. Dalian, China grain futures were sharply lower today and crude oil is slightly lower but so is the $, sending mixed signals to our grain market.

Weekly export sales were good for wheat (000 omitted) 437 and meal, 101 old crop and 47 new. Beans were a bit slow, 44 old crop and 236 new. Corn sales were in line, 200 old and 389 new while oil sales were also in line, 8.

Informa supposedly comes out wth their crop production estimates at 10:30 US Central time this am.

There is still no significant rain in the outlook for dry Argentine wheat areas the next 7 days or so, which will further stress the crop there. Australian wheat will benefit, at least in the important growing area of northern New South Wales, which accounts for roughly 30% of the crop, with 1/2 to 2" of rain forecast today. Wet conditions will delay spring wheat harvesting in the Canadian prairies although harvesting in the US northern plains spring wheat belt is roughly in line with a normal pace. Late season dryness in India's oilseed region due to the early withdrawal of monsoon rains is stressing crops there. Late season rain in China's main bean growing region is helping the crop there.

The US midwest saw beneficial rain in several states yesterday, especially Illinois, where up to 3" fell. Light rain is possible Sunday in the western corn belt and again Wednesday. The east could see more rain Sun-Mon. The 6-10 day calls for above normal rain. There is no serious freeze threat for the midwest the next week or longer. ---Vic Lespinasse

Better Start in Grains Possible Today

A mostly better start is likely this am, up about 10 in wheat and 1-3 in beans but unchanged to 1 lower corn. There were still no deliveries in meal and only 3 in beans so far this month, reflecting the very strong cash market for these commodities due to tight supplies until new crop beans become available. Cash beans supposedly are trading as high as 50 cents over Nov futures in parts of Minnesota while cash high-protein meal is supposedly trading as high as $25 over Oct futures in parts of Minnesota and as much as $15 over Oct in central Illinois, much higher than normal. Crude oil is higher this am while the $ is a shade higher at this moment. Dalian, China grain futures were lower today so the outside markets are sending mixed signals to our grain market this am.

Louis Dreyfus, the huge international grain exporter (where I worked over 30 years ago) is guessing the Australian wheat crop around 21-22 milion tonnes, 1-3 million tonnes lower than most other trade guesses. There has been growing talk of a lower Australian wheat crop recently. However, more beneficial rain is forecast in northern New South Wales, one of Australia's largest wheat states, today.

This morning's monthly census bureau oil stocks report showed 271 million lbs of bean oil was used to make bio diesel fuel in July vs 279 million in June. The official name for the fuel made from bean oil is methyl esters.

The Argentine truckers strike is slowly spreading after 6 days but no shortages of beans at the export ports has been seen so far. If the strike continues, shortages could appear at the ports, which would be bullish for US bean export prospects. The strike will probably be settled by then, however. Cool, wet weather is likely to remain in the Canadian prairies the next several days, slowing harvesting of the wheat crop there. Little rain is forecast for the dry Argentine wheat belt the next 7 days, stressing the crop there further. Late season dryness in India's oilseed region will continue stressing oilseed crops there.

Heavy rain in the US delta from the hurricane is expected to continue today before mostly dry weather moves into the region tomorrow through the weekend. All this recent rain has slowed bean harvesting. The midwest is seeing rain from the remains of hurricane Gustav with up to 3" expected over most of Illinois today, for example. Up to 1.5" of rain fell in parts of Iowa and Missouri this am also from the remains of the hurricane. More rain is likely in the western corn belt today through Saturday with additional rain in the eastern corn belt Sun-Mon. The 6-10 day calls for above normal rain in the midwest. Although it is late in the season, especially for corn, this moisture will still benefit late developing crops, especially beans.

Here is some news from yesterday's market, some of which is still influencing the market today: USDA secretary Ed Schafer said late Tuesday the USDA will reevaluate everything, including early release of acreage from the CRP setaside program if conditions change, whatever that means. Early release would have a bearish impact on the market, especially 2009 new crop months.

Egypt yesterday bought 120,000 tonnes of US soft red winter wheat, the type we trade here in Chicago, helping wheat end higher yesterday. Lower Australian wheat production talk yesterday also helped wheat end higher despite losses in all the other pits. A lot of unwinding of long corn/short wheat was seen yesterday also.

The USDA attache in Moscow raised his Russian wheat production guess 5% to 56.2 million tonnes. The main bearish influence for beans and corn yesterday was the higher $ and lower crude oil markets. Also, FC Stone’s crop guesses were nowhere near the bullish rumored numbers, coming in with a corn crop guess of 12.159 billion bushels with a yield of 153.4 bushels per acre and a bean guess of 3.003 billion with a yield of 41. The August USDA guesses were 12.288 corn with a yield of 155 and beans 2.973 with a yield of 40.5.

Funds were big, aggressive sellers yesterday in corn, beans, meal and oil, anywhere from 2000-5000 each. A major hedge fund was closed down yesterday after suffering huge losses of almost 40%, with 27% losses coming during August alone. This contributed to the losses in most grain pits yesterday as traders reasoned more hedge or index funds could be in trouble due to falling commodities prices. Out of 987 hedge funds started this year, 679 have been liquidated already due to market losses, about 70%!

Beans good to excellent rating Tuesday afternoon fell more than expected, down 4% to 57% while corn also dropped more than expected, 3% to 61%.

Vic Lespinasse in Des Moines IA

Program Note:
Vic Lespinasse's Daily Grain Commentary will be unavailable tomorrow. Vic will be in Des Moines IA, participating along with other market experts at a marketing discussion hosted by Successful Farming magazine and AgricultureOnline.com.

Crude Oil Selloff Affecting Grains

A sharply lower to possibly limit down start is expected this am following the huge sell off in crude oil and the very strong rally in the $. The relative lack of damage from Hurricane Gustav is being given as the reason for the huge sell off in the crude oil market. Dalian, China grain futures are sharply lower today while Malaysian palm oil fell 136 ringgit. All these markets will weigh heavily on our grain market this am. The early call is roughly 35 lower wheat, 30 down corn and 65-70 lower beans.

The Republican party platform calls for an end to Federally-mandated requirements on the use of ethanol in gasoline, a position that Senator McCain apparently agrees with. The Republicans want the market to decide how much ethanol should be used in gasoline. If this were to become law, this would probably be bearish for corn demand.

The Dalian, China grain exchange surveyed China's bean crop and they are estimating it at 19 million tonnes vs the 17.5 million tonne guess of the government think tank, the China National Grain and Oils Information Center.

No significant rain is now forecast for Argentina's wheat belt this week, increasing stress on the crop. Beneficial rain fell in Australia's wheat areas over the weekend with up to 1.25" in northern New South Wales, a major wheat growing area. More beneficial rain is forecast in China's main grain areas the next several days. The Canadian prairies were cooler and wetter over the weekend, slowing harvesting. Some freezing temps are possible there this week in northern parts of the belt.

Wet weather over the weekend in the US northern plains spring wheat belt and more forecast this week will slow wheat harvesting there. The midwest was mostly dry over the long weekend. Rain is forecast in the midwest the next several days, some resulting from hurricane Gustav. This late season rain will be welcome. The 6-10 calls for cooler and drier in the west with warmer and wetter in the east.

Keep an eye on crude oil and the $ today for direction in the grains. ---Vic Lespinasse