Grain report
By Dr. Robert Wisner

Corn
Look for cash prices to trend irregularly upward into mid-winter with a gradually improving basis (cash prices moving closer to futures) and with competition among crops for 2008 acreage. The strongest prices will likely be at river markets as the close of navigation approaches on the upper Mississippi, with bids at processing plants, and feed mills being a close second. Key market indicators include USDA’s Nov. 9 crop production report, weekly export sales, and Southern Hemisphere reports on crop conditions for South American feed grains as well as wheat soon to be harvested in Australia.

Watch forward pricing opportunities for late spring and summer delivery if you have farm storage—especially if you are close to feed mills, export terminals or ethanol plants. These facilities typically have only limited grain storage capacity. When their corn supplies run low, they tend to bid up prices for a short time. If weather concerns here or abroad develop, these users may also offer substantial premiums above other markets for forward contract sales.

As we went to press, much of the Australian wheat-barley belt needed rain and major grain areas in Brazil were too dry for spring planting. With critically tight world wheat supplies, failure of the Australian wheat crop to recover sharply from last year’s extreme drought would be a supporting or strengthening influence on corn. Usually, about 4 billion bushels of wheat are fed annually to foreign livestock.

Corn export sales this fall have been the strongest since the mid-1990s, when weather problems here and abroad held cash corn prices at $5 per bushel in the western Corn Belt for almost 6 months. Cumulative export sales at press time were 32 percent above a year earlier and only 7 percent below the previous high for this time of the year in 1995.


Beans
Look for cash prices to gradually trend upward into early winter with a strengthening basis. Futures prices appear likely to find support near recent levels, and will continue to be quite volatile. As you analyze marketing alternatives, look carefully at forward contract prices for summer delivery if you have on-farm storage. For beans stored in town, check forward pricing opportunities for late January and February deliver.

In the next several months, prices should be supported by indications that soybean supplies will become very tight in 2008-09 unless U.S. or South American soybean plantings expand sharply. The rapidly expanding EU biofuels industry and growth in U.S. biofuels production also are supportive to prices. But be aware that high prices during South America’s October to December planting season could bring a sizeable increase in acreage for harvest in March and April. If crop prospects look good there, foreign buyers will start shifting their purchases to South America in late February.

Trade reports earlier in the fall had indicated Brazil’s soybean acreage this season might be up 10 to 12 percent from last season. However, reports at press time had trimmed that back to the 5 to 6 percent range. That and a similar increase in Argentina would be enough to weaken soybean prices some in late winter and early spring if yield prospects are good. However, early indications are that soybean prices will have to be high enough relative to corn to encourage some of this year’s U.S. corn acres to return to soybeans in 2008.

Key market indicators to watch include the November 9 USDA crop report, weekly export sales, and monthly crush reports. At press time, cumulative new-crop U.S. soybean export sales were record high, reflecting strong Chinese demand and concern about 2008-09 world supplies.


Wheat
Prices have been at all-time record highs this fall, but there are cautions pointing to downside risk in the wheat market. The biggest risks are that high prices will bring a sharp increase in U.S. and foreign wheat acreage.

For the U.S., the first USDA estimate of 2007-08 winter wheat acreage will be in early January. Key factors in the wheat price outlook include Australian crop prospects, weekly export sales, and U.S. winter wheat crop conditions. Severe drought last year cut Australia’s crop by about 58 percent from the previous season. As we went to press, Australian trade sources expected its production to be well below recent USDA projections because of continued dry weather in some areas.. USDA analysts have been expecting a moderate recovery from the 2006 drought.

World wheat carryover stocks are expected to be at record or near-record lows as a percent of annual use at the end of the current marketing year. This reflects serious weather problems not only in Australia, but also in the southern plains of the U.S. last spring and summer, Europe, parts of the former Soviet Union, and other areas.

Foreign weather problems and reduced carryover stocks have triggered a strong surge in U.S. exports and export sales, especially for hard red and soft red winter wheat. As we went to press, combined hard red winter wheat exports to date and outstanding unshipped sales were up 243 percent from a year earlier.

Africa, Egypt, South Africa, Algeria, and Morocco all shifted from zero purchases at that time last year to substantial customers this season. This area was being supplied by wheat from Black Sea sources last year. Shipments of U.S. hard red winter wheat to unknown destinations accounted for nearly one-fifth of total sales. ?

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