On April 9, the USDA released its monthly supply and demand report. This report contains only information about the old crop supply and demand figures. The May supply and demand report will be the first report the USDA will release on its early estimates for the 2009/10 new crop corn and soybean markets.

In the April 9 report, the USDA slightly lowered corn carryout to 1.7 billion bushels from 1.74 billion last month. This is still larger than last year’s 1.624 bb. The USDA made no revisions to supply, but increased feed usage by 50 million bushels to 5.350 bb. Crush and mill usage was lowered by 10 million bushels and exports were left unchanged at 1.7 bb. The export forecast is attainable as the USDA only has to export 17 mb each week to meet the

USDA forecast. Total corn usage is now pegged at 12.04 bb versus production of 12.101 bb. Thus, usage is nearly equal to production last year and mandates that no corn acres are lost compared to a year ago. The 1.7 bb is not a bullish number by any means as it indicates there will be virtually no chance of running out of corn this summer and virtually insures that there will be large carry-in stocks to begin the next marketing year. Large farmer holding of corn stocks nearly guarantees that producers will be willing sellers on each rally attempt during the spring and summer as they try to reduce their inventory ahead of this fall’s harvest.

The USDA lowered soybean carryout by 40 mb to 165 mb. The 165 mb carryout figure is the tightest ending stocks since the 2002/03 marketing year. In that year, stocks eventually tightened to 112 mb, but the market did its job by rallying high enough to safely ensure the U.S. would not run out of soybeans. The USDA lowered crush and mill by 5 mb, but increased exports by 25 mb to 1.21 bb. Total usage is now estimated at 3.011 bb, which actually exceeds usage of 2.959 bb. The increased usage has allowed stocks to fall from 205 mb last year to 165 mb this year. Needless to say, soybean acres need to increase this spring to ensure the U.S. produces enough soybeans to meet the strong demand base.

The USDA also lowered the Argentine soybean production figure to 39 million tons, thereby reducing world stocks to 45.84 mts from 49.95 mts.

Wheat ending stocks were lowered slightly to 696 mb, down from 712 mb last month, but a whopping 390 mb larger than last year’s 306 mb.

Wheat stocks have a large cushion this year against a small winter wheat crop or if spring wheat seedings decline due to wet conditions this spring.

Corn analysis

Corn closed the week $.14 1/4 lower. The weekly export sales report showed net sales of 1.06 million metric tons were down 15 percent from the previous week, but up 7 percent from the prior four-week average.

Increases were reported for Japan (411,900 MT, including 96,300 MT switched from unknown destinations), Taiwan (155,000 MT), Egypt (128,800 MT, including 60,000 MT switched from unknown destinations), South Korea (122,500 MT, including 116,000 MT switched from unknown destinations), Mexico (95,100 MT, including decreases of 24,900 MT), the Dominican Republic (58,900 MT), Chile (25,900 MT) and Canada (24,300 MT).

Decreases were reported for unknown destinations (22,500 MT). Net sales of 18,900 MT for delivery in 2009/10 were for Japan (11,400 MT) and Mexico (7,500 MT). For the marketing year, corn sales are 58 percent behind last year’s demand pace. The USDA has now exported 1.34 bb of corn compared to 2.126 bb last year. To reach the USDA forecast, the U.S. needs to export 17.2 mb each week.

Last week, the USDA announced a 116,000 mts 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 for April look to be cooler and wetter than normal, limiting any fieldwork activities. By month’s end, planting progress should become a market-moving factor.

Soybean analysis

Soybeans closed the week $.11 1/2 higher. The weekly export sales report showed net sales of 431,500 MT were down 28 percent from the previous week and 14 percent from the prior four-week average. Increases were reported for China (238,700 MT, including decreases of 64,000 MT), Mexico (72,500 MT), Taiwan (49,000 MT), unknown destinations (28,000 MT), Japan (22,200 MT, including 10,000 MT switched from unknown

destinations), and Costa Rica (8,600 MT, switched from Guatemala). Decreases were reported for Guatemala (8,600 MT).

Net sales of 190,200 MT for delivery in 2009/10 were for China (110,000 MT), unknown destinations (60,000 MT), Italy (17,000 MT), and Japan (3,200 MT). Optional origin sales of 120,000MT for delivery in 2009/10 were for China. This year’s export pace remains well above last year’s pace as the U.S. now has export commitments for 1085 mb compared to 1017 mb a year ago. The U.S. only needs to average 6.7 mb to reach the USDA forecast. Harvest in South America has reached 61 percent completed in Brazil and 15 percent in Argentina.

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

Some in the trade believe with the wet spring that farmers will plant less corn and switch to soybeans if corn plantings are delayed significantly.

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.