CORN

In its September supply/demand report, the USDA reported its corn production forecast at a record 13.2 billion bushels, down 2 percent from the August forecast, but up from the previous record of 13.1 billion bushels set in 2009.

Based on conditions as of Sept. 1, yields are expected to average 162.5 bushels per acre, down 2.5 bushels from the previous month and 2.2 bushels below last year’s record of 164.7 bushels.

Corn ending stocks are expected to shrink to 1.11 billion bushels by the end of 2010/11, down 19.5 percent from one year ago. The stocks-to-use ratio of 8.3 percent would be the smallest since 1995-96 and represents a 4 1/2-week supply. The USDA production cut was due to hot, dry weather this growing season that has helped prices rise by nearly 17 percent since August.

SOYBEANS

Soybean production is forecast at a record high 3.48 billion bushels, up 1 percent from August and 4 percent above last year. Based on Sept. 1 conditions, yields are expected to average a record high 44.7 bushels per acre, up 0.7 bushel from both last month and last year.

Despite near-record exports of 1.485 billion bushels, which were 50 million bushels higher than a month ago, end stocks would more than double to 350 million bushels.

Traders expected USDA to lower its crop forecast by 1 percent and forecast end stocks of 285 million bushels. Compared with last month, yields are forecast higher or unchanged across the central and northern Corn Belt, with the exception of Michigan.

The largest increases in yield from last month are expected in Maryland and Virginia, both up four bushels. With the exceptions of Louisiana and the Carolinas, yields are forecast down across the Delta States, Southern Great Plains and Southeast.

The largest decline from the Aug. 1 forecast is expected in Oklahoma, down seven bushels as drought conditions across much of the state hampered yield expectations. If realized, the forecasted yield in Illinois, Minnesota, Nebraska, New York and North Dakota will be a record high.

Area for harvest in the United States is forecast at 78 million acres, unchanged from June but up 2 percent from 2009.

Hoops’ analysis: This report was bullish for corn with the USDA lowering the yield and production forecasts and shrinking the carryout stocks. This will put enormous pressure on the 2011 crop year to not only increase acres, but to also produce a big enough crop to increase the ending stock profile. This bodes well for corn prices this fall and through the winter. As corn prices rise, soybeans should also benefit, price wise.

Corn analysis

Corn closed the week $.13 3/4 higher. Last week, the USDA did not report any private export sales.

Last week’s crop progress report showed national good-to-excellent ratings were down 1 percent to 69 percent, compared to a week ago. 11 percent of the crop is rated either poor-or-very-poor. Last year’s ratings were 69 percent g/e and 9 percent p/vp. Harvest is just beginning with just 6 percent harvested nationwide verus 4 percent harvested normally this time of year.

Early yield reports are disappointing compared to a year ago, however the crop is more mature than last year.

The weekly export sales report showed net sales of 680,200 metric tons for the 2010-11 marketing year, which began Sept. 1.) This year’s export profile is now at 595 mb versus the USDA forecast of 2.1 billion bushes. Large speculative traders added to the already net record long positions last week.

Soybean analysis

Soybeans closed the week $.04 lower from last week. Last week, the USDA reported private sales of 115,000 mts of soybeans to China, 60,000 tons of bean oil to China and 90,500 tons of bean oil sold to various destination.

The USDA reported crop ratings of 64 percent g/e, unchanged compared to last week. Iowa is rated 69 percent g/e, Illinois at 63 percent g/e, Indiana 52 percent g/e, Minnesota 89 percent g/e and Nebraska at 68 g/e. 12 percent of the crop is rated p/vp. Last year, 68 percent of the crop was rated g/e and 8 percent was rated p/vp.

The weekly export sales report showed net sales of 848,200 MT for the 2010/11 marketing year, which began Sept. 1. This year’s export pace stands at 651 mb versus the USDA forecast of 1.485 bb.

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.