GRAIN REPORT
By Dr. Robert Wisner

CORN

While yields may be sharply below normal in your area, the market is reflecting large areas of good crops in much of the western Corn Belt. That's likely to keep prices at disappointing levels until at least mid-winter, unless USDA's

Oct. 12 and Nov. 10 crop forecasts place potential U.S. production significantly below 10.1 billion bushels. Yields are expected to be sharply below normal in much of Missouri, Illinois and parts of extreme eastern Iowa, Indiana and Ohio. That has pulled U.S. production well below last year's extremely large crop. But rising old-crop carryover stocks will offset part of the crop losses.

If you need to buy corn for feed, plan to cover a major part of your needs this fall, either through forward contracts or preferably through on-farm storage if you have adequate bin space.

Returns for on-farm corn storage should be above normal this year, with local returns depending on how weak your basis is at harvest time. Where yield prospects are good, the basis has been the weakest in several years due to a lack of storage space and inability to get rail cars to move grain out quickly. The basis should strengthen gradually from late November into winter as harvest pressure subsides. Rapidly expanding ethanol processing capacity also will support a stronger basis this winter and next spring. In addition to a strengthening basis in early 2006, grain traders probably will want to see more corn acres planted in 2006 to support the rapid expansion in the ethanol industry. That's likely to be a firming influence on early spring corn prices.

Weather also will be a key influence on prices during the late February to mid-May period. Some weather analysts hint that signs of a possible La Nina weather pattern are starting to show up. That would increase the risk of more widespread drought next year.

BEANS

USDA's Oct. 12 and Nov. 10 crop forecasts will be key influences on soybean prices this fall and winter. Good rains in August over part of the western and northern Soybean Belt probably helped yields in those areas. But yields will be low in dry areas that missed the rains, and these two reports will provide a clearer picture of how the regional variations in production are averaging out. Indications at press time were that the U.S. crop would be between 2.75 and

2.8 billion bushels. Production in this range almost certainly would tighten carryover stocks significantly by

Aug. 31, 2006, thus increasing the chance for at least modestly higher prices from the end of harvest into late January. If the October report puts production below 2.75 billion bushels, the market would be quite sensitive to any hint of South American weather problems. If you need protein meal for livestock or poultry feeding, consider covering a significant part of your needs into mid-to-late January during the last half of October.

Prospects for soybean export demand look good through late February. China has become our largest export market for beans and now accounts for about 40 percent of total U.S. exports. A continuing increase in Chinese consumer incomes is expected to keep the uptrend in its meal and vegetable oil demand in place. Because of Brazil's severe drought last winter and early spring, its available export supplies will be below normal for late fall and winter. Argentina's bumper 2005 harvest will be partially but not completely offsetting. Floods in India reportedly hurt soybean production. India is a huge user of vegetable oils but normally exports some soybean meal to Asian markets. U.S. domestic demand will reflect increased production of distillers grain and solubles from new and expanded ethanol plants. But that should be at least partially offset by increased poultry production.

WHEAT

Look for steady to slightly higher hard red winter wheat prices into late October or early November as the trade focuses on acreage prospects for this fall. Soft red wheat price prospects are less optimistic, due to a slow start in export sales.

At press time, hard winter wheat export sales were running 8 percent above a year earlier. But soft red wheat sales were down a whopping 65 percent from a year earlier.

The decline was broad-based geographically, reflecting plentiful foreign supplies of low-priced low-protein wheat. The sharpest decline was in sales to China, with this year's U.S. sales totaling only 0.7 million bushels vs. 34.6 million bushels a year earlier. More soft wheat sales to China can't be ruled out, but early projections indicate its total imports of all classes of wheat from all sources will be slightly less than half as large as last season.

Despite a questionable outlook early last spring, China's 2005 wheat production is now estimated to be about 4 percent larger than in 2004. Production problems in North Africa may also generate some increase in export sales, but at this writing most indicators suggest it will be difficult for U.S. wheat exports to match last season. For that reason, U.S. carryover stocks are projected to rise to about a 15-week supply, up from 12.6 weeks last season.

Protein content of hard spring wheat has been a bit disappointing this year. In markets where protein premiums are paid, that may provide some support for hard wheat.

At the world level, wheat production for 2005-06 is projected to be 2.2 percent below a year earlier. But with larger old-crop carryover stocks being brought into this marketing year, USDA projected total world wheat supplies to be up from last season.