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BRIAN HOOPS

By Staff | Jan 7, 2011

CORN

The month of December was bullish for corn values as corn closed 99 cents higher. This month’s supply/demand report has the potential to be a major market mover as the USDA will issue the final production forecast for the 2010 crop and update the demand figures.

Current export forecasts are nearly identical to last year at this time. In addition, ethanol usage is 250 million bushels above last year’s figures, giving corn usage a nearly 350 mb advantage over last year.

Traders are going to look for the USDA to decrease its final 2010 corn production estimate and to increase their demand estimates, slowly tightening the balance sheets.

Farmer selling should increase after the first of the year as farmers will need to move some corn to maintain the quality of the stored crop, but basis levels should narrow through the winter months.

SOYBEANS

The month of December was bullish for soybean values as soybeans closed 150 cents higher. The huge demand base for soybeans, estimated at a record 3.371 billion bushels, comes in the form of record strong export demand and a very strong crush pace.

Ending stocks are forecast to remain tight at 165 mb. The market has been anticipating some production problems in Argentina, which will reduce the size of the planted crop plus cut into yield forecasts.

Updates on this year’s production from South America will be a major driving force for prices throughout the winter. This month’s supply/demand report has the potential to be a major market mover as the USDA will issue the final production forecast for the 2010 crop and update the demand figures.

Export forecasts are early 90 mb above last year at this time and with the ongoing strong sales, look for the USDA to again tighten balance sheets and increase exports.

Traders are going to look for the USDA to decrease its final 2010 soybean production estimate and to increase their demand estimates, slowly tightening the balance sheets.

Farmer selling looks to be a minimum this winter as producers are more interested in selling corn and holding onto their soybeans in case another weather problem persist in South America and prices move higher.

WHEAT

The month of December was bullish for wheat as Chicago wheat managed to close 144 cents higher. The winter wheat crop is now in dormancy until March. Winter wheat’s good-to-excellent ratings near the lowest in 20 years at 47 percent. Only light snow cover has blanketed the main winter wheat states of Nebraska, Kansas, Oklahoma and Texas, leaving the winter wheat crop susceptible to winter kill against freezing temperatures and without the snowcover, moisture when wheat breaks dormancy will be limited.

CORN ANALYSIS

Corn closed the week $.15 higher. Last week, private exporters reported a sale of 120,000 metric tons of corn sold to Mexico. The weekly export sales report showed net sales of 756,600 MT were down 17 percent from the previous week and 4 percent from the prior four-week average.

This year’s net export profile is now at 1.024 bb versus the USDA forecast of 1.950 bb.

Strategy and outlook: Going into the January crop report, the down side is likely limited as end users should be buyers on weakness. Farmers will not be too willing to part with inventory until after the crop report.

Producers have sold/hedged a portion of the 2010 crop and re-owned cash sales with call options. Bought call options when corn hit $5.26 to re-own 2010 cash sales.

Don’t become too aggressive marketing the 2011 crop until more is known about the 2011 marketing year.

SOYBEANS ANALYSIS

Soybeans closed the week $.44 1/4 higher from last week. Last week, private exporters reported sales of 110,000 MT of soybeans to China.

The weekly export sales report showed net sales of 663,200 MT were down 20 percent from the previous week and 8 percent from the prior four-week average.This year’s export pace stands at 1.285 bb versus the USDA forecast of 1.590 bb.

Strategy and outlook: Weather forecasts in South America will be closely watched for price direction. Soybeans have major chart support near $12 which will only be broken if Argentina receives major rainfall amounts as that country has been extremely dry.

Major upside potential exists if weather turns hot and dry in Brazil.

Producers have sold/hedged a portion of the 2010 crop and re-owned cash sales with call options. Don’t become too aggressive with marketing the 2011 crop until more is known about the 2011 marketing 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.

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