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BRIAN HOOPS

By Staff | Apr 10, 2009

On March 31, the USDA issued the first of several highly anticipated reports that will have a major impact on 2009 price discovery for corn and soybeans. The first prospective Planting Intentions report of 2009 and Quarterly Grain Stocks report were met with skepticism by the trade due to the surprising lack of soybean acres estimated by the USDA compared to the trade estimates.

This report’s planting intentions information will be used by commercial and speculative traders, by buyers and growers of grain in preparing balance sheets to project potential production and ending stocks levels.

No doubt the next report in June will have seen corn, soybean and likely spring wheat acres change considerably as weather and futures prices will have a dramatic impact on growers decisions on which grow to plant this spring.

If too cool and wet conditions persist through the spring timeframe, spring wheat and corn producers, particularly in Northern Midwest counties, will be inclined to switch to soybeans that prefer a shorter growing season.

Soybean values need to rally versus corn if soybeans are to buy acres from corn. The current pricing structure favors growers plant corn over soybeans in most locations.

The USDA estimated U.S. corn growers intend to plant 85 million acres of corn for all purposes in 2009, down 1.2 percent from last year as lower corn prices and unstable input costs are discouraging some growers from planting corn. If realized, this will be the second consecutive year-over-year decrease since 2007, but will still be the third largest acreage since 1949, behind 2007 and 2008. Expected acreage is down from last year in many States, however, producers in the 10 major corn-producing States – Iowa, Illinois, Indiana, Kansas, Minnesota, Missouri, Nebraska, Ohio, South Dakota and Wisconsin – collectively intend to plant 66.3 million acres, up slightly from the 66.1 million acres planted last year.

U.S. soybean producers intend to plant 76 million acres in 2009, up slightly from last year. If realized, the

U.S. planted area would be the largest on record. Acreage increases of 100,000 acres or more are expected in Iowa, Arkansas, Kansas, Mississippi, Nebraska, North Carolina, North Dakota and Ohio. The largest decreases are expected in Missouri and South Dakota, both 150,000 acres less than 2008.

If realized, the planted acreage in Kansas and New York will be the largest on record, and the planted acreage in North Dakota will tie the previous record high.

All wheat planted area is estimated at 58.6 million acres, down 7.1 percent from 2008. The 2009 winter wheat planted area, at 42.9 million acres, is 7 percent below last year, but up 2 percent from the previous estimate.

Of this total, about 30.9 million acres are hard red winter, 8.38 million acres are soft red winter, and 3.65 million acres are white winter.

Area planted to other spring wheat for 2009 is expected to total 13.3 million acres, down 5.9 percent from 2008. Of this total, about 12.7 million acres are hard red spring wheat.

The expected Durum planted area for 2009 is 2.45 million acres, down 10 percent from the previous year.

Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.

Corn analysis

Corn closed the week $.02 higher. The weekly export sales report showed net sales of 1.25 metric tons were up 5 percent from the previous week and 42 percent from the prior four-week average.

Increases were reported for Japan (404,700 MT, including 84,300 MT switched from unknown destinations and 20,800 MT late reporting), South Korea (332,000 MT), Mexico (139,700 MT), Taiwan (71,600 MT), Colombia (58,800 MT), Cuba (50,000 MT), and the Dominican Republic (39,500 MT). Decreases were reported for Egypt (7,000 MT). Net sales of 8,100 MT for delivery in 2009/10 were for Japan. For the marketing year, corn sales are 58 percent behind last year’s demand pace.

The USDA has now exported 1.298 billion bushels of corn compared to 2.107 bb last year. To reach the USDA forecast, the U.S. needs to export 18.3 million bushels each week.

Last week, the USDA announced a 116,000 million tons corn sale to an unknown destination. The upside for corn remains limited by large farmer inventories. On each rally attempt, farmer selling should increase as cash flow needs mandate farmers liquidate some inventory and farmers generally have more corn to sell compared to soybeans. Early planting conditions are not ideal as the first two weeks of April look to be cooler and wetter than normal, limiting any fieldwork activities.

Soybeans analysis

Soybeans closed the week $.18 1/2 higher. The weekly export sales report showed net sales of 599,800 MT were up 40 percent from the previous week and 53 percent from the prior 4-week average.

Increases were reported for Mexico (131,100 MT), Japan (116,200 MT, including 45,000 MT switched from unknown destinations and 27,700 MT late reporting), Indonesia (77,400 MT), unknown destinations (72,700 MT), China (57,800 MT), and Taiwan (38,900 MT). Net sales of 581,100 MT for delivery in 2009/10 were for China (412,000 MT), unknown destinations (168,000 MT), and Japan (1,100 MT).

This year’s export pace remains well above last year’s pace as the U.S. now has export commitments for 1069 mb compared to 996 mb a year ago, or 7 percent better than a year ago. The U.S. only needs to average 6.3 mb to reach the USDA forecast.

Harvest in South America has reached 52 percent completed in Brazil and 10 percent in Argentina. With the spread between new corn and new crop soybeans at 2.11 mb, I still think new crop soybeans remain too cheap for farmers to effectively plant this year.

New crop soybean values need to rally to over the next three weeks to attract lost acres to corn.

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