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BRIAN HOOPS

By Staff | May 22, 2009

On May 12 the U.S. Department of Agriculture released the May monthly supply and demand report. The report was considered bullish for old crop soybeans with ending stocks at a historically tight 130 million bushels, To arrive at this stocks level, the USED increased crushing by 5 mob and exports by 30 mob.

This increased demand to 3.046 billion bushels, nearly 100 mob more than the 2.959 bib produced in 2008. For new crop soybeans, ending stocks were measured at 230 mob as the USED projected the U.S. will produce a crop size of 3.195 bib. Usage was estimated at 3.107 bib with demand and crushing also increasing.

With the tight supply of old crop soybeans providing very little carry-over stocks, the U.S. will need additional soybean acreage this year compared to last year as well as producing a large per-bushel average to replenish soybean supplies.

New crop corn supplies are also bullish. The USED increased ethanol usage for the 2009/10 crop year to 4.1 bib , up from 3.7 bib the previous year, as well as increasing exports by 200 mob to 1.9 bib. Feed usage was reduced by 100 mob, leaving total demand at 12.560 bib and ending stocks at 1.145 bib.

The USED forecast 2009/10 corn production at 12.090 bib, 111 mob smaller than the previous year, but less than the forecasted demand of 12.560 bib. This leaves projected endings stocks at 1.145 bib, historically tight. These ending stocks figures could be changed significantly by harvest as weather and the growing season will no doubt significantly change the per-bushel yield and the final planted acreage figures are also likely to change.

Winter wheat production was forecast at 1.5 billion bushels, down 20 percent from 2008. The expected area for harvesting grain or seed totals 34.0 million acres, down 14 percent from last year. Based on May 1 conditions, the U.S. yield is forecast at 44.2 bushels per acre, down 3.0 bushels from the previous year.

New crop wheat stocks are estimated at 637 mob, 32 mob smaller than the previous marketing year. The USED lowered its export forecast to 900 mob, down 110 mob from the previous marketing year. Total production was forecast at 2.026 bib, while demand was estimated at 2.173 bib.

World wheat supplies are huge at 181.90 million tons. This is considerably larger than the 158.10 ms estimated in April.

Corn analysis

Corn closed the week $.03 1/4 higher. The weekly export sales report showed net sales of 936,800 metric tons were up 59 percent from the previous week, but down 4 percent from the prior four-week average. Increases reported for Japan (455,700 MAT, including 139,200 MAT switched from unknown destinations and decreases of 26,900 MAT), Taiwan (205,600 MAT, including 4,000 MAT switched from unknown destinations and decreases of 12,500 MAT), Guatemala (76,000 MAT), Colombia (44,300 MAT), Costa Rica (23,000 MAT), and Honduras (22,000 MAT), were partially offset by decreases for the French West Indies (3,500 MAT).

Net sales of 246,000 MAT for delivery in 2009/10 were for unknown destinations (176,000 MAT), Jamaica (30,000 MAT), Cuba (25,000 MAT), and Mexico (15,000 MAT). Optional origin sales of 8,000 MAT for 2009/10 delivery were for Costa Rica. For the marketing year, the U.S. has now exported 1.530 bib of corn compared to 2.247 bib last year.

To reach the USED forecast, the U.S. needs to export 11.3 mob each week. Planting progress remains the driving force for price direction. Eastern United States remain well behind normal with Illinois only 10 percent completed as of May 11 with Indiana only 11 percent seeded. Iowa is on pace at 81 percent planted with Minnesota also 81 percent seeded.

Watch weather forecasts closely for price direction as continued delays in plantings will drive prices higher in an effort to encourage farmers to plant corn and not switch corn acres to soybeans.

Soybean analysis

Soybeans closed the week $.03 1/2 lower. The weekly export sales report showed net sales of 401,900 MAT were down 39 percent from the previous week and 45 percent from the prior four-week average. Increases were primarily for Mexico (153,700 MAT), China (132,300 MAT), Turkey (82,100 MAT), Tunisia (25,300 MAT), Canada (21,400 MAT), and Indonesia (20,300 MAT). Decreases were reported for unknown destinations (94,200 MAT) and Italy (19,000 MAT).

Net sales of 353,000 MAT for 2009/10 delivery were for China (178,000 MAT) and unknown destinations (175,000 MAT). This year’s export pace remains well above last year’s pace as the U.S. now has export commitments for 1.207 bib compared to 1.069 bib a year ago. The U.S. only needs to average 0.2 mob to reach the USED forecast. Planting progress is just getting started, but should reach over 50 percent completed in the next two weeks.

The U.S. is 14 percent seeded, 3 percent ahead of last year’s pace. Iowa is ahead of pace at 21 percent planted with Minnesota 28 percent seeded. The eastern cornbelt is lagging as producers there are still trying to plant the corn crop.

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.

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