CORN: In the month of January, corn gained 15 cents from the previous month’s close. The first half of the month of February looks to be slightly friendly for the corn market.
With the bullish January supply/demand report fresh in the minds of traders, the market will search for price discovery and a price level which will stimulate U.S. farmers into seeding more acres this spring.
Ending stocks are estimated at only 745 million bushels versus 1.708 billion bushels last year and will provide a solid floor for the old crop prices. With another friendly report in February, ending stocks could shrink to near 700 mb.
Corn continues to closely follow the crude oil market and seasonally, crude oil bottoms in February before increased usage draws down crude stocks and prices rally.
Last year, U.S. farmers planted 81.4 million acres. Corn producers are expected to plant 2-3 million more acres in 2011 compared to 2010 as the higher new crop corn prices compared to a year ago should attract more corn acres this spring.
Producers should look to buy the weakness in the first half of February for a late-month rally.
SOYBEANS: In the month of January, soybeans futures closed eight and one-half cents higher for the month. February looks to bring the addition of slower export sales as early planted beans in Northern Brazil begin to come to harvest and hit the world market at a price lower than any U.S. posted price.
Because Brazil can only store up to 25 percent of its harvest, it is forced to forward sell approximately 75 percent of the early-harvested soybeans.
It is the period between mid-February and May that South America over takes the U.S. as the primary port of origin for beans.
This will leave weather on late-maturing crops as the sole bullish factor for South American soybean values. February in Brazil and Argentina is like August here as it’s a key yield-developing month for three quarters of the crop.
If weather turns hot and dry, prices will rally sharply, however with good rains across the country, the price of soybeans should continue south.
The USDA supply/demand report was again friendly in January as it lowered estimated ending stocks to 140 mb, down 25 mb from the December report.
Ahead of the February USDA supply/demand report, traders will anticipate the USDA to leave ending stocks unchanged to cutting the stocks due to the record strong demand pace for soybeans.
The soybean market’s main job is to attract additional acres this spring and rebuild the ending stocks to a more comfortable level. With demand forecast at 3.355 bb, U.S. producers are expected to plant an additional 500,000 to 1 million acres this spring to help meet that demand.
WHEAT: It was a bullish month for wheat prices as Chicago wheat closed January 31 1/2 cents higher than December.
February is the last month before the winter wheat crop breaks dormancy, and grows into the June harvest.
Thus with winter wheat still in the dormant stage, price direction will come from demand.
Demand trends have been well ahead of last year due to the tightening supplies of wheat worldwide.
For winter wheat, the crop entered dormancy with ratings at or near 20-year lows. So far this winter, very little snowfall has covered parts of Kansas, Oklahoma and Texas, leaving the key winter wheat growing states to have very minimal snow cover.
The key growing timeframe for wheat is the March through May period when wheat has broken dormancy and is growing toward maturity.
Wheat is like grass growing in your yard, it may look dead, however if ample rains fall in the spring, it will green up quickly.
Technical trends are higher for all the wheat contracts. With smaller seeded acres and a low-rated crop, wheat must sustain price strength into the spring corn and soybean planting timeframe, otherwise risk farmers tearing up their winter wheat fields and planting either corn or soybeans in its place.
The combination of stronger demand trends and the bid for acreage leaves this as a prime marketing opportunity.
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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