The grain report - NOW AND LATER

NOW AND LATER............ Monday began with all three grains market opening higher on a weak dollar and crude oil up over 2 dollars pulling ethanol futures produced by corn and soybeans with soyoil to biofuels before pushing lower on good weekend rains in Brazil. Brazil saw .50 to 2 inches of rain over 85% coverage. This benefited previous planted fields, but will encourage further planting from areas that had waited moisture. It's not a drought ender, but the 6 to 8 outlook looks wetter. So, there is further chances for all acres to get seated. The importance here is if timely rains prevail Chinas overbooking of US beans will end. Should La Niña weather persists with eventually drier conditions, China will pick up there buying as insurance. Remember, Brazil one third of the worlds exportable beans. Monday's weekly export inspection report showed 60.2 million bushels of beans were inspected for near term export versus 70 the week prior and strong four-week average of 45. China was in for 47m.b. versus the four prior weeks of 41, 18, 8.5 and 8. Clearly they're nervous. Corn inspections were 25.5 million bushels versus 23.9 the week prior, 27 a year ago and four-week average of 28. Talk in the market is the two-year high prices were pushing has importers stepping back. The other thoughts are China and others are loading up and beans now and will shift to corn next. Either way, were not in a demand psychology and corn near-term but a bullish supply-side market as we get ready for the USDA November 9 crop report that will give the market it's best estimate of final corn production. Wheat inspections were a weak 16.1 million bushels versus 23.5 last week and four-week average of 22. After the close of trading our crop progress and condition report came out. Corn harvest came in at 91% complete. Soybeans at 96% harvested. The remaining harvest shows up on the December USDA reports with its importance to determine the by the November 9 report. If next Tuesday's report is overly bullish then the balance of acres yet to come, can make a difference. But,a mildly friendly report and the trade will say, crops done, it's all about demand now. Wheats crop condition report came out showing 46% of the crop is in good to excellent condition down 1% from the week prior and under a year ago of 64%. Key producers read like this. Colorado 30% good to excellent down 1% from the week prior. Texas 35%, up 6%. Oklahoma 31% unchanged. Nebraska 38% down 2% and number one wheat producing state Kansas 38% good to excellent down 4% from the week prior. Clearly were off to a weak start and weather this week again looks generally dry in Kansas and the Eastern grain belt where the soft red winter wheat states are. There are five market days left from Tuesday to get position prior the release of the Tuesday, November 9. 7:30 AM central time USDA crop report. Pre-report trade estimates by the long list of brokerage houses will come out late week and give us on idea as to how their positioned. A common thinking is the corn report is expected to be most bullish as continued talk on harvest into November one yields were disappointing. Note, the corn harvest in October was the highest rated corn on weekly crop condition reports. Beans too had talk of poorer than expected yields, but crop condition report showed the highest rated beans were harvested in October to show up on the November 9 report. This is where the surprise could come from. When everyone is looking for a bullish report, and it comes out bearish. But, if common thinking trades fear first we should expect commercials to further cut their short held positions and speculators buying long into the report. After the report is priced in November 9. Look for funds to take profits pulling us down. At that point we will have to determine is this a temporary monthly break or a bigger harvest end correction. Unless weather in Brazil worsens driving beans higher dragging the other grains along, we should expect the November 9 report high price results to hold all month as this report represents the last of our bullish supply-side report. Then grains trade weekly demand indicators and outside markets as funds attached grains to their trading portfolio and come in each day and determine wether to buy or sell off crude oil, dollar index, stock indices and metals in order of importance. That's all they will have to go by as grains are locked up on the farm for long winters nap until spring uncertainties enter on planting. Long-term thinking, buy a break this week and take profits the day prior or of the November 9 crop report. Sell short off the report day high and look for the fifth consecutive monthly crop report high correction. Then expect a light early December rally followed with a bigger break January 1 to February 15 timeframe as funds seasonally lighten up their record held position. The January low point should have us buying summer month call options and call spreads when funds seasonally add 30% or more of their long held positions for a spring battle for acres and summer growing season concerns. The market to see the biggest gains percentage wise in 2011 will be oats, that could double in price. We will explain why when buying time comes.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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