On March 10, the USDA released the March supply/demand report was considered negative to corn and wheat as U.S., and world, ending stocks were increased, while providing support for the soybean market which saw U.S. ending stocks shrink to below 200 million bushels.

This report also included a new corn and soybean production figure as USDA re-surveyed producers in Iowa, Illinois, Nebraska and Minnesota in an effort to determine the amount of unharvested grain from last fall. They did not resurvey acres in North or South Dakota, but did leave the door open for another production change as they intend to re-survey producers in the Dakotas as they have harvested last year’s crops this spring.

The USDA lowered the 2009 corn production forecast by 20 mb to 13.131 billion bushels while lowering the corn export forecast by 100 mb to 1.9 bb. This left the resulting corn ending stocks at 1.799 bb, an increase of 80 mb from the February report.

Looking at world numbers, the USDA raised the Argentine corn crop to 21 million metric tons from 17.2 mmts last month and up from 15 mmts last year. The larger production figure also means a significant increase in exports to 12 mmts from 9.5 mmts a year ago.

These numbers are certainly not bullish for the corn market. Unless the USDA begins to reduce the crop sizably in the next report, the only hope for old crop corn stocks appears to be a weather rally this spring or summer.

The U.S. has an adequate supply of corn, although producers with a high quality of corn stocks are expected to be rewarded for the quality with tighter basis premiums over the poor quality corn.

As with corn, the USDA made a minor revision to the 2009/10 crop size, lowering it by only 2 mb to 3.359 bb.

The 2 mb reduction was offset by a 7 mb increase in imports while the USDA improved demand by 30 mb as they raised crush by 10 mb to 1.730 and exports by 20 mb to 1.420 bb.

Overall, the USDA lowered old crop ending stocks by 20 mb to 190 mb. This is historically tight, however the trade knows the majority of our export and crush business was front end loaded and this supply of soybeans will be adequate for any future needs barring a crop catastrophe this summer.

The USDA raised the Brazilian soybean crop to 67 mmts and left Argentina unchanged at 53.0 mmts. World ending stocks advanced to a three year high at 60.7 mmts.

Compare that figure to last year’s 42.0 mmts. The world ending stocks indicates the world has plenty of soy supplies available until the next U.S. harvest this fall.

Soybeans will not be in a fight for acreage this spring with corn due to the big supplies, but the U.S. can ill afford to lose acreage either with overall demand equal to last year’s production.

The wheat situation was quiet once again with the only revision to the U.S. balance sheets a 20 mb reduction in food usage to 920 mb. The USDA left export at 825 mb and feed/residual at 170 mb. However, the lower food usage pushes wheat stocks up to 1.001 bb from 981 mb last month and is 34 percent larger than the estimated 657 mb a year ago. The stocks to usage ratio is the highest since the mid1980s at 50.4 percent.

The Argentine wheat crop increased to 9.6 mmts from 9 mmts, while the Australian, Canadian and EU balance sheets were unchanged from a year ago. The USDA raised world wheat stocks to 196.8 mmts from 195. 9 mmts last month. This is well above last year’s 165.6 mmts and is the largest world wheat stocks estimate since 2001/02.

Corn analysis

Corn closed the week $.11 1/4 lower. Fund selling following the bearish supply/demand report left the market reeling and closed lower for the week. The market is starting to anticipate a delayed start to the planting season as a heavy snow cap and forecasts for a wet spring are providing support.

Limiting the upside potential for corn is a large amount of old crop corn that has quality issues. The USDA reported a private sale of 116,000 mts of U.S. corn to South Korea. Commercials continue to provide support to the market as they are buying back their shorts and are now using price weakness as an opportunity to extend coverage into the summer months, which always brings uncertainty and production concerns.

The weekly export sales report showed net sales of 338,600 MT for delivery in 2009/10 were down 56 percent from the previous week and 53 percent from the prior four-week average. This was the smallest exports in two months.

Soybean analysis

Soybeans closed the week $.17 1/4 lower from last week. China cancelled previous soybean purchases, only to re-own those sales through private purchases at lower price levels. China purchased 330,000 mts of U.S. soybeans for the 2010/11 crop year in two separate purchases.

The weekly export sales report showed net sales reductions of 115,800 MT for delivery in 2009/10. This was the first negative sales report in six years and the worst weekly export sales in six years.

Commercials are at their most bullish position since the rally began in March of 2009. Look for major commercial support to limit the downside in soybeans to the $8.92 chart support.

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.