The following market analysis is for the week ending Nov. 9.

SOYBEANS — The Nov. 9 U.S. Department of Agriculture report didn’t hold any shocking news for the bean complex. Bean production for the United States was pegged at 3.204 billion bushels, up 15 million bushels from the October report, but 33 million bushels less than the average pre-report guess. The yield was increased 0.2 bushels per acre to an even 43 bu./acre. The ending stocks projection of 565 million bushels was only 10 million larger than last month. The average increase for beans yields from the November report to the final in January in the last 20 years is 0.35 bu./acre. In only eight of the last 20 years has the bean yield increased on the November report and was followed by an increase in January. The average farm price showed impressive gains, up 50 cents to a range of $5.40 to $6.40 for the marketing year. The market’s reaction to the report was mixed. Beans had rallied into the report, and when met with mildly friendly numbers, consolidation may be in order.

World numbers this month were a non-event. Ending stocks rose 0.16 million metric tons to 55.22 mmt.

The IBGE out of Brazil (sort of a counterpart of the U.S. Census Department) released their Brazilian bean estimate at 55.2 mmt. This was close to other recent forecasts. USDA’s November number was left unchanged at 56.0 mmt. Brazil is projected to be 50-percent planted by Nov. 10 in good conditions.

Basis levels remain firm with farmer selling fairly steady, but nothing in volume. Processors are the market.

OUTLOOK: January beans are near enough to the last forecast of $7 that we’ll set our sights on $7.25 as our next target. The first line of support is at $6.50, then $6.25. Seasonally, beans tend to trade sideways/lower through December. This year I would look to the corn market for direction. Beans need to maintain their ratio with corn to avoid losing excessive acres and cutting the carryout cushion too thin in the 2007-08 marketing year.

CORN — The “buy the dips” attitude prevailed again this week. Just like an old broken record, we have the same message as before: the market will signal when it’s accomplished its goals of rationing acres and all the money has found a home. To date, we’re still waiting for that signal. But in the meantime, look for opportunities and ways to manage your risk if the market rolls over in dramatic fashion. You don’t want to be caught napping and miss these excellent prices. Look to limit your downside for both old and new crop on at least a portion of your crop.

The USDA Nov. 9 Supply-Demand report came in below the average trade guess at 10.745 billion bushels, down 160 million from October’s report. The yield at 151.2 bu./acre was down 2.3 from last month. The average yield decrease from the November number to the January final number is 0.66 bu./acre in the last 20 years. Ten out of the last 20 years saw a decline from the November report to the final in January. Traders will be anticipating further cuts in January. The carryout, at 935 million bushels, was a decrease of 61 million from October. This was accomplished by a reduction in exports and feed/residual use of 50 million bushels each. The average farm price was bumped up 40 cents to a range of $2.80 to $3.20. As in beans, world numbers saw little change.

For the last few weeks, the broiler egg set numbers have been declining. This week was no exception as it fell 3 percent versus last year’s levels. In this situation, it appears the corn market is resulting in rationing. End users missed the first half of this corn rally and seem determined not to miss any more. They have shown as buyers on small breaks again this week. Export sales this week were an astounding 76 million bushels. U.S. export commitments are running 40 percent ahead of last year when total exports are forecast to up only 2.5 percent. Rationing still needs to be done.

OUTLOOK: We almost hit the near-term target of $3.70 that we set last time, but it’s within our grasp. Talk of $4 corn is moving out of the shadows and into the mainstream. If achieved, further gains above that level may be harder to capture. After today’s USDA report, we’ll be looking for a range in March corn of $3.50 to $4. Fund buying continues to flow into the agricultural sector. Looking at these high prices it’s easy to get caught up in the excitement, but it also brings to mind the old saying, “hogs get slaughtered.” Don’t be left holding the oink.


Phyllis Nystrom is a market analyst with Country Hedging in St. Paul.