During February, corn closed 52 1/2 cents higher, obviously a bullish month for corn. In March, we should expect traders to anticipate an increase in planted acreage in the March 31 report of 1 to 3 million acres.
A heavy snow cap over the Midwest combined with forecasts for a cool, wet spring will make planting additional corn acres difficult.
Thus corn should find strength in the last half of March and early April as the market will need to secure acres to meet record demand.
Commercial interests will view pullbacks in the market as buying opportunities with forecasts for a cool, wet spring could give way to flooding across the Midwest key growing regions during the heart of the growing season.
Thus commercial entities as well as large speculators will want to be long ahead of the growing season. With the already saturated soils and additional rain forecasted this spring, a drought is very unlikely this summer.
Highs for corn are likely to be scored during the spring planting timeframe or very early summer as values rally to secure enough planted acres to meet demand. As price levels rise, producers should be offsetting price risk by making cash sales and using options to manage the risk.
February was a bearish month for soybeans as the South American harvest weighed on prices and beans lost 47 1/2 cents this month. The key pod-setting stage in South America should be completed by March 15, leaving the market to remove any weather premium that may remain in values.
The next monthly USDA supply/demand report will be released on March 12. The USDA report should show very little change in U.S. ending stocks and with the South American growing season effectively over as well as an expectation for an increase in U.S. seeded acres in 2011, look for prices to work lower after the report.
In the March 31 acreage report, the trade should be expecting an increase in U.S. soybean seedings of 500,000 to 1 million acres.
If wet growing conditions materialize this spring as forecast, corn will rally to buy acres as the market anticipates farmers will shift corn acres to soybeans. A very wet forecast will like the upside for soybeans.
Like with corn, technical breaks should be well supported by commercial entities as they begin to position long ahead of the growing season as they wish to extend coverage in case prices rally sharply on a rather related event.
February was a bearish month for prices as KC wheat values lost 37 1/4 cents during the month. In the month of March, growing conditions for the U.S. winter wheat will be the main driving force for prices.
The winter wheat crop that is lying dormant makes up approximately 67 percent of our exportable wheat. Winter wheat’s growing cycle begins by the end of March and the market will remain sensitive to weather issues.
Winter weather across the Plains has been disappointing for the wheat crop so far as only limited snowfall has failed to provide a blanket of insulation.
Remember, the better the conditions of the crop will translate into better quality of wheat and attract foreign demand, eventually leading to a demand-driven bull market following the winter wheat harvest.
Conversely, low crop ratings will rally prices during a supply market, but will draw foreign buyers away due to the poor quality of the wheat, especially if other foreign countries have wheat to sell.
If the U.S. produces high quality wheat, importers will book U.S. wheat in late April and May for shipment after harvest.
Exports are well ahead of last year’s export pace. The March 12 USDA crop report will not update production estimates, leaving poor weather and world demand as wheat’s only hope for a rally during March.
Expect short-covering ahead of the planting intentions report at the end of the month.
Spring wheat futures, traded on the Minneapolis Grain Exchange, should find strength into the planting intentions report as the market will bid against corn and soybeans for seeded acres this spring.
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.