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USDA NOVEMBER WASDE (World Agricultural Supply and Demand Estimates) REPORT HIGHLIGHTS

CORN

2009/10 corn production is projected at 12.9 billion bushels down 103 million bushels from October. The US national average yield is projected at 162.9bpa down 1.3bpa from last month. US corn exports are projected 50 million bushels lower reflecting the slow pace of sales and shipments in recent weeks and prospects for increased competition from larger Black Sea corn and wheat supplies. US corn ending stocks are projected down 47 million bushels. The 2010 marketing year average farm price projection is raised 20 cents on each end of the range to $3.25 to $3.85 peer bushels. Global corn production for 2009/2010 is lowered 2.8 million with reduced production in the United States, Brazil, European Union, and Russia. Global course grain ending stocks are lower this month with 3.8 million ton reduction in world grain corn stocks.

SOYBEANS

Soybean production is estimated at 3.319 billion bushels, up 69 million from last month based on high yields vs. expectations of 3.27 billion bushels. Soybean yields are projected at 43.3 bpa up 0.9bpa from last month. Ending stocks are projected at 270 million bushels up 40 million bushels from last month vs. expectations of 230 million bushels. Soybean crush is raised 5 million due to higher projected soybean meal exports. Soybean exports are increased 20 million bushels to a record 1.32 billion reflecting increased supplies and increased global import demand mainly from China, EU-27, and Russia. Prices for soybeans and products are projected higher reflecting higher corn and soybean future prices. The 2009/10 marketing year average farm price is projected at US $8.20 - $10.20/bu, up 20 cents on both ends of the range from last month. Soybean meal prices are projected at $250 to $310 per short ton, up $5 on both ends of the range. Global oilseed production for 2009/2010 is projected 3.6 million tons higher due to increases in production by the United States, Brazil, and Argentina.

WHEAT

U.S. ending stocks for 2009/2010 are projected 21 million bushels higher at 885 million bushels compared to Octobers estimate of 864 million bushels, and the analyst expectation of 870 million bushels. Global wheat supplies are projected 1.7 million tons higher as increased production more than offset a reduction in beginning stocks. Foreign production is raised 3.9 million tons with most of the increase in FSU-12 as an extending growing season and favorable harvest weather boosted yields.

BOTTOM-LINE:

This November USDA WASDE report was viewed as bullish corn and bearish soybeans and wheat. An unexpected yield decrease to corn should help the market moving forward as ending stocks were moved lower. This report was bearish soybeans as production was increased based on a significant yield increase. We noted that if yields exceeded 43.4bpa than prices may test lows of $8.85, and the yield estimate was 43.3 so we may move close to the lows established in early October. Once again wheat supplies remain abundant both domestically and globally. Wheat will continue to look for corn to give it some much needed direction, but we still feel wheat has established a bottom moving forward into 2010 at US$4.40per bushel.


The crop progress was released yesterday showing that the harvest continues to struggle to progress. The corn crop is 32% harvested vs. the five year average of 82% and the soybean crop is 75% harvested compared to the five year average of 92%.

Moving forward we remain bullish corn as ending stocks are tightening, and harvest progress remains significantly behind. Low test weights, poor quality, and high moisture levels are also affecting this year’s corn crop. Soybeans were the most surprising this report as production and ending stocks were increased significantly. Moving forward this changes our 30-60 outlook to bearish, but long term into next year we remain bullish. Wheat supplies remain abundant but the wheat market is apt to be more affected by corn prices, than supply so we remain bullish wheat.



In other news, a story was out yesterday that Chinese corn production would be lower than many were expecting and Goldman Sachs is projecting higher corn prices, and corn deficits in the coming months as biofuel demand and a positive view of the energy market will push up prices. News from GS increased fund buying in the corn market immediate as open interest increased by 12k on Tuesday.

Please visit our website at www.riskmanagement.farms.com.

Let us know your thoughts on the USDA's activity this year.

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