GRAIN REPORT
By Dr. Robert Wisner

CORN
Prices will probably be weak for the first few weeks after harvest while grain elevators use up supplies piled outside. The basis and prices should begin to strengthen at least modestly by mid-December, with further strength likely into spring. New ethanol plants and large livestock numbers have built a strong domestic demand base. The ethanol industry will continue expanding through 2006, further strengthening demand. Exports should be good but may run a little below last season because of better foreign crops. As next spring's planting season approaches, the grain trade will likely peg corn needs for the coming year at about 10.8 billion bushels. Another near-record U.S. corn yield would be required to produce that much corn, and the odds of 3 consecutive years of record corn yields are small.

These prospects indicate corn storage into spring in quality, well-managed, on-farm facilities should be low risk. Risk levels can be lowered further by using non-roll HTA (futures only, or basis not established) contracts to protect prices for spring delivery while retaining opportunity for basis improvement. That's specially important if you have cashed out LDPs this fall. If you understand options markets, purchasing call options would add up-side price flexibility to this marketing strategy. Purchased calls would increase in value if futures prices rise sharply next spring in response to weather concerns.

At press time, new-crop corn export sales were lagging far behind 1995 and 1996, the two most recent years when expectations called for season total exports of 1.9 to 2.1 billion bushels. The slow start to new-crop sales may reflect larger foreign crops than projected by USDA. Or it may reflect foreign buyers waiting for peak harvest pressure on prices. If new-crop sales haven't accelerated to 1.1 to 1.25 million tons per week by late October, foreign crops may be better than currently indicated.

BEANS
Prices will take direction in the next few weeks from harvest progress, weekly export sales and USDA's Oct. 12 crop report. October crop estimates should be good indicators of crop size. But with the cool summer, soybeans in northern Iowa, Minnesota, Wisconsin, the Dakotas, Michigan and Ohio had higher risk of frost damage than normal.

Any damage in these states might not be fully reflected in production estimates until the Nov.12 report.

Weekly export sales at press time were off to a more impressive start than corn. Outstanding new-crop sales were up 61 percent from the same date in 2002 and 31 percent above 2001, both of which were years of strong exports. However, outstanding sales were down 30 percent from a year earlier.

Year-ago sales were strong because of traders anticipating a short U.S. crop. To support a moderate post-harvest rally in the basis and cash prices, fall export sales should move up to 0.5 to 0.6 million tons per week. Several weeks of higher sales could add to price strength in November and December.

South America's aggressive spring and summer shipments also should be supportive to late fall and early winter price strength. Brazilian and Argentine supplies will decline seasonally during this period sooner than in a normal year.

Early indicators point to increased foreign supplies of rapeseed and canola oil, which may slightly weaken soybean oil prices.

By mid-December, the soybean market will focus on South American weather and planted acreage reports from the South American grain trade. An increase of 5 to 6 percent in Argentina's soybean plantings is generally anticipated. Traders expect about a 10 percent increase in Brazilian soybean plantings.

WHEAT
Look for hard and soft wheat prices to trend irregularly upward into early November, as the market reacts to reports of planting progress and crop conditions, export sales to China and expected total acreage. With normal planting progress and enough rain to get the Great Plains crop off to a good start, potential price strength would be modest. A dry fall could add considerable strength. Upward potential on soft wheat prices may be a little more than for hard winter wheat. While yields were better for soft wheat than for hard red winter wheat, soft red export sales have been much stronger.

Hard red winter wheat exports from the Gulf of Mexico have had difficulty competing with higher quality hard red spring wheat from the Dakotas and Montana. Spring wheat moves to Asia through Pacific Northwest ports. Increased ocean freight rates hit Gulf shipments harder because of their greater distance to Asian markets.

Key market indicators for wheat in the weeks ahead will include weekly export sales, USDA's monthly world crop report and U.S. new-crop conditions. The world crop report, out the same day as monthly U.S. crop reports, will give updated estimates of major foreign crops.

Based on late summer and early fall weather, estimates may increase modestly for the EU, former Soviet republics, Canada and possibly Australia. Trade and USDA analysts anticipate competition from these countries will be considerably stronger than last year. However, China is an important offsetting factor. For the last few years, Chinese wheat imports have been small. But this year it has been an aggressive buyer of U.S. wheat.

China has made moderate purchases of soft red and hard red spring wheat from the U.S., along with small purchases of white wheat. Its purchases account for all of the increase in export sales of these two classes of wheat.