GRAIN REPORT
By Dr. Robert Wisner

CORN

Look for gradually increasing cash prices into the winter and spring as demand responds to low-cost corn for feed and processing. In areas that had severe drought last summer and in locations near river markets or ethanol plants, prices will recover earlier than elsewhere. Even so, prices likely will have trouble getting up to the CCC loan rate before planting time. That's when traders begin to worry about weather for the upcoming season. If you have corn in good, well-managed storage facilities, plan to move a sizeable part of it in April, May and June. If you haven't priced it yet, watch for periods of modest price strength this winter as opportunities to boost sales. The main factors that could bring significant strength in spring and early summer prices are either on a sharp cut in corn plantings because of high nitrogen prices or widespread weather problems. If you need to buy corn for feed, watch for periods of price weakness to increase feed coverage through the April to June quarter.

Corn exports were off to a slow start this fall due to generally good foreign crops and plentiful supplies of low-cost feed wheat from the former Soviet republics and Canada. At press time, season-to-date U.S. corn exports and outstanding un-shipped sales were down 9 percent from a year earlier. That's not an encouraging sign considering that last year's exports were sharply below early projections. Weekly corn export sales for the next month or two should consistently be in the 1.1 to 1.5 million ton range to confirm official marketing year total export projections. Weekly sales reports are released on Thursday mornings.

Watch for USDA's Jan. 12 crop estimates. Changes in crop estimates over the last 40 years suggest there is a good chance the final estimates will be modestly above the October estimates.

BEANS

Soybean prices are likely to show at least modest volatility into late January or early February as the market responds to weather and crop conditions in South America. Recent USDA reports project Aug. 31, 2006 U.S. soybean carryover stocks at a 4 to 5 week supply. A 3 to 3.5 weeks supply is needed just for normal processing, merchandising, and exporting activities, so indicated reserve supplies are not burdensome. They should be fully adequate, provided South American yields are near normal. But weather problems in South America would cause foreign buyers to depend more on U.S. supplies for late summer needs and could quickly deplete our stocks. Also look for a gradually strengthening soybean basis (cash prices moving closer to futures) this winter and into the spring. Plan to use rallies this winter to boost old-crop marketings.

At press time, U.S. soybean and bean product export sales were lagging sharply behind a year earlier. Sluggish sales included sharply lower business with China and the EU, which typically are the largest export markets for U.S. soybeans.

Chinese crushers appear to have bought more beans than they needed last summer and have been using up inventories. Also, in early fall they took advantage of large South American supplies that were still available. For the next 3 months, South American supplies should be tighter, thus causing both the Chinese and EU to shift more heavily to U.S. soybeans.

Asian bird flu is a potential restraint on export demand for beans and meal that should be watched closely, but at press time it was not a big factor. Cases of bird flu were being reported in Turkey and Romania as well as some former Soviet republics and in southeast Asia. But slaughtering of birds to control the disease was minimal. Widespread cases of bird flu in China or the EU would restrain up-side soybean price potential.

WHEAT

Look for modest volatility in hard wheat prices in the next few months as the market focuses on weather and crop conditions in the Great Plains. Consider using modest rallies this winter as opportunities to increase old-crop sales, giving highest priority to sales of wheat stored in town. At press time, soil moisture in the central and southern plains was shorter than last year and low enough to make grain traders nervous if widespread snowfall is not received this winter. Soft red wheat conditions going into early winter looked better, and sluggish export sales likely will temper upside potential on soft wheat.

World supplies are indicated to be down less than 0.1 percent from last year, although supplies of higher quality high protein hard wheat may be a bit tighter. Supplies of lower quality and lower protein wheat appear to be ample, unless extreme cold, ice, or lack of snow cover threatens the U.S. crop.

Important market indicators to monitor in the next several weeks include 1) weekly export sales reports, released on Thursday mornings,  2) reports on winter wheat crop condition, and 3) USDA's 2005 season-final crop estimates to be released on Jan. 12. The Jan. 12 report also will contain estimated plantings of winter wheat for harvest in 2005. As we went to press, many analysts expected at least a modest decline in soft red winter wheat plantings and a slight increase in hard red winter wheat planted acreage.

At press time, season-to-date export sales of hard red winter wheat were 17 percent above a year earlier. The increase was due largely to increased buying by Iraq and Nigeria.

In contrast to hard red winter wheat, export sales of soft red winter wheat were down by a startling 50 percent from a year earlier. Nearly all of the decline was due to a sharp drop in sales to China. China's 2005 wheat crop is estimated to be up 3 percent from the previous year.