Soybeans

USDA’s supply and demand report was bearish with harvested acres expected to increase by 1.5 million to 76 million and soybean production expected to increase 65 million bushels to 3.26 billion. Export estimates were increased 40 million bushels to 250 million bushels. The USDA predicts an average price of $9.30 which is down from $10 last month. World yearend supply was increased by less than a million bushels.

The main pressure on grain, oilseed and fiber prices was weather related. Corn Belt weather has remained cool with intermittent rain, which is bullish for soybean production. However, the markets anticipate increased supply and therefore prices are pressured into falling lower. Soybean market volatility is increasing. The crop condition rating at 66 percent good to excellent is better than average. However, only 23 percent of soybeans are blooming where the average is 42 percent.

China is beginning to sell soybeans from reserve supplies. That is market bearish, but the price of Chinese beans for export exceeds the U.S. price.

India and China are importing record amounts of soy oil. The market trend is short term negative but carryover supplies are below average. Crop production is expected to be above average, unusual for a late crop. Soybean export sales of 684,000 tons this week were near the high end of expectations.

Corn

Corn production estimates were increased 355 million bushels in the USDA report which will increase carryover stocks to 1.55 billion bushels. USDA predicts an average cash price for corn of $3.75. The allocation to ethanol production is over 4 billion bushels, unchanged from last month’s report. The EPA has until the end of this year to allow or reject an increased ethanol fuel blend from 10 percent to 15 percent. USDA predicts 87 million acres with 153 bushels per acre, a bearish number. Production estimates of 12.29 billion bushels are the second highest on record.

Farmer selling of corn remains light. Trader selling continues in light of favorable weather for production and increased acre estimates from USDA. Prices have found support below $3.50 and stabilized. The crop condition rating is 71 percent good to excellent, 4 percent above average. Export inspections of 39 million bushels were above market expectations. Demand for corn remains strong. Weekly export sales of 1.16 million tons were at the high end of market expectations. Investors have taken $2.5 billion out of corn markets. Most of that, 80 percent, was taken out in the past month. Market prices have dropped 28 percent in a month.

Wheat

Wheat carryover supplies are predicted to increase up to 700 million bushels. Harvest is near complete for U.S. winter wheat and harvest pressure on prices is always bearish. Wheat crops in Canada, Australia and Argentina are in poor condition, and yields are expected to be lower than average. Russia and Ukraine have ample supplies of wheat for sale. World wheat supplies are increased. United States production is estimated at 2.11 billion bushels. The estimate increased 96 million bushels in a month.

Traders perceive the wheat market was oversold. Index fund traders remain on the long side of wheat markets. Other traders are selling wheat. Fundamentals of supply and demand do not support higher wheat prices. Wheat technical charts also point to a negative short term trend. Wheat export sales of 422,000 tons met expectations. Wheat crop condition ratings are above average for spring wheat. India has again banned wheat exports.

Rice

Rice markets are technically overbought. Crop condition ratings are well below average. United States rice production estimates were lowered again. Vietnam continues rice exports at a rapid pace. Thailand has intentionally slowed rice export sales in light of a smaller than anticipated crop from the United States. Rice export sales were down this week as anticipated near 23,000 tons. Prices are trading within a consolidation pattern because lower production from the United States is offsetting ample supplies stored in Southeast Asia. Medium grain rice acres have increased as long grain rice acres declined. Demand for medium grain rice from California to Southeast Asia is driving the change.

Cotton

Cotton ending supply estimates are 5.6 million bales. Anything below 6 million bales is considered tight. Supplies are expected to continue to decline throughout 2010. Short term bearish factors and long term bullish factors are offsetting one another with prices finding support near 60 cents. USDA predicts a decline in exports with the total for the upcoming crop year to near 10.2 million bales, but markets have factored in most of the bad news. Domestic use is down to 3.5 million bales.

Rain in Texas this past week rescued the crop there from hot dry conditions. However, abandonment potential of cotton in Texas had been estimated at 2 million acres.

China has enough cotton in reserve supplies for the immediate future and should have fewer imports this crop year, along with Pakistan and Thailand. Short term technical signals have been negative but any price increase on world stock markets supports increased cotton prices. Cotton is technically overbought. Traders’ buying supports prices because inflation is expected once demand picks up. Weather has adversely affected crop conditions in China and India.