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BRIAN HOOPS

By Staff | Mar 18, 2011

CORN

The market was looking for a minor decline in stocks to 667 million bushels from 675 million last month, but without any changes, stocks still sit at 675 million bushels.

Feed usage implications from the upcoming report of March 1 stocks could set the tone of old crop prices for the subsequent two- to three-month period, while the market is anticipating a large corn acreage increase for 2011/12, with four million acres likely and some comments of late pushing towards a 6 to 7 million acre jump.

The Prospective Plantings report could set the tone for new crop prices for the coming two- to three-month period, as well.

The USDA made a few modest changes to the world corn situation this month. The Brazilian crop was raised 2.0 million metric tons to 53.0 MMT (56.1 MMT last year), but exports were left unchanged at 7.0 MMT and compared to 11.6 MMT last year.

USDA lowered the Mexican corn crop by 2 MMT to 22.0 MMT (20.4 MMT last year) and raised imports by 1.1 MMT to 9.0 MMT (8.3 MMT last year). However, USDA left the Argentine crop at 22.0 MMT, while the market generally feels the crop is closer to 21.0 MMT.

The Chinese balance sheet was unchanged as well. USDA reflected a minor increase in 2010/11 world corn ending stocks to 123.1 MMT, down from 123.5 MMT last month and are down from 144.5 MMT last year.

SOYBEANS

As with corn, USDA essentially left the U.S. soybean balance sheet unchanged this month. Crush at 1.655 billion bushels and exports at 1.590 billion were unchanged from last month. USDA did, raise its estimate of seed usage higher to 91 million bushels from 88 million previously, which compares to 90 million in 2009/10.

To counteract the seed increase, USDA lowered the residual usage estimate by 3 million bushels to 19 million. This left 2010/11 U.S. soybean ending stocks at 140 million bushels, unchanged from last month, and in line with market expectations of 141 million.

The end of March reports for soybeans will also be critically important for soybeans. With very little room in the old crop balance sheet, any surprises in the March 1 stocks figure could have a notable impact on old crop prices. Looking forward, the prospects of starting the 2011/12 balance sheet with historically low stocks adds to the importance of the Prospective Plantings report.

A huge weather premium could be seen throughout the planting/early growing season in the soybean market as there will be little room for yield problems if acreage is near unchanged.

On the world front, USDA raised the Brazilian crop by 1.5 MMT to 70.0 MMT and is in line with overall market thoughts. Ending stocks were raised by 0.5 MMT to 15.4 MMT and compares to 16.1 MMT last year. Separately, the Brazilian government raised its estimate of the soybean crop to 70.3 MMT from 70.1 MMT previously, as well.

USDA left the Argentine crop unchanged at 49.5 MMT, which is generally in line with market ideas. USDA also raised last year’s Chinese soybean crop to 15.2 MMT from 14.4 MMT previously estimated, but left imports unchanged at 57.0 MMT. USDA lowered Chinese ending stocks for 2009/10 by 1.5 MMT to 13.3 MMT, essentially leaving 2010/11 stocksnear unchanged from last month at 16.3 MMT.

CORN ANALYSIS

Corn closed the week $.63 3/4 lower. Last week, private exporters reported a 150,000 MT of corn to Mexico.

The weekly export sales report showed net sales of 477,200 MT were down 56 percent from the previous week and 60 percent from the prior for-week average. This year’s net export profile is now at 1.356 bb versus the USDA forecast of 1.950 bb.

Strategy and outlook: Only limited selling is expected from now until more is known about the 2011 growing season of both old and new crop inventories.

Producers and are now sold/hedged on 80 percent of the 2010 crop and re-owned 35 percnet of sales/hedges with at-the-money May call options after rolling up March $5.20 calls. Producers should have 30 percent of new crop production sold. Make another old and new crop 10 percent sale at $7.59.

SOYBEANS ANALYSIS

Soybeans closed the week $.79 1/2 lower from last week. This year’s export pace stands at 1.463 bb versus the USDA forecast of 1.590 bb.

Strategy and outlook: Only limited U.S. selling is expected from now until more is known about the 2011 growing season of both old and new crop inventories. South American producers will become active hedgers if forecasts turn wetter. Producers should have 30 percent of new crop production sold. Make another 10 percent sale of old and new crop at $14.85.

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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