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November crop report is bearish for soybeans, wheat"At face value I would say that today's adjustments by the U.S. Department of Agriculture (USDA) should be supportive for corn but bearish for soybeans and wheat," Gavin Maguire, director of EHedger, said. Maguire spoke during a press briefing on Nov.10 held by the CME Group to discuss the Nov. 10 USDA Crop Production Report. The crop report put corn production at 12.9 billion bushels compared to 12.94 billion bushels that analysts had estimated on average. This is down 1 percent from last month. Corn yield came in at 162.9 bushels per acre compared to an estimate of 163.912. This is down 1.3 bushels from last month and 9 bushels above last year. Soybean production came in at 3.32 billion bushels compared to an estimated production of 3.26 billion bushels. This is up 2 percent from last month and up 12 percent from last year. The supply and demand report put the ending stocks for corn in the 2009-2010 marketing year at 1.625 billion bushels compared to 163 billion bushels estimated. The ending stocks for soybeans came in at 270 million bushels for the same market year compared to 236 million bushels estimated. The ending stocks for wheat came in at 885 million bushels compared to 870 million bushels estimated. "I think the increase in national yields for soybeans has been coming for some time," Maguire said. "I think there is some upside room there, once we get harvest wrapped up. I think there will be a lot of soybeans sloshing around that people had not anticipated a few weeks ago." The downward revision in corn yield is friendly for the corn market. Maguire said there is still some skepticism out there on the usage side of the equation for corn. "As we get deeper into the corn harvest, which will go into December, I think eyes will look more and more at the demand side for the market, questioning feed demand and export demand." David Hightower, editor of the Hightower Report, said it is important to realize that the free markets work. "We had significant tightness in soybeans, significant tightness in wheat and we corrected those problems," Hightower said. "We are seeing the tail end of that situation as we repair those very tenuously tight supply levels." Based on the USDA numbers in this report, Hightower has a negative near-term outlook. Hightower said the corn market is probably 35 to 50 cents too high off these numbers and there is a wall of supply coming into the soybean market. Wheat production numbers have been raised, also. "We have two components rising and it will serve as a drag on the corn market," Hightower said. "Two out of three leaves it in the bear category." Maguire said commodities are appealing to millions of dollars of managed money looking for a home. Investment money will continue to pour into these markets. The prospects for big soybean crops in Argentina and Brazil are very real and it will have a big negative impact on the markets, Hightower said. "We could see the highest levels of soybean inventories that we have ever had, globally," Maguire said. "Five years from now we will routinely see soybeans over $10 but 2010 will be mixed. We have the potential to visit some lows that we have not seen for quite some time." More changes are in the cards for the 2009 crop year, thanks to the late harvest. Hightower said we could see a little less corn and a little more soybeans in the next report. "There is still a lot of variability out there," Hightower said. Doug Rich can be reached by phone at 785-749-5304 or by e-mail at richhpj@aol.com.
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