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BRIAN HOOPS

By Staff | Apr 8, 2011

In the March 31 Quarterly Stocks and Acreage report, the USDA reported U.S. corn growers intend to plant 92.2 million acres of corn for all purposes in 2011, up 5 percent from last year and 7 percent higher than in 2009.

If realized, this will be the second highest planted acreage in the United States since 1944, behind only the 93.5 million acres planted in 2007. Acreage increases of 250,000 or more are expected in Iowa, Kansas, Nebraska, North Dakota, Ohio and South Dakota. The largest decrease is expected in Texas, down 150,000 acres.

Soybean planted area for 2011 is estimated at 76.6 million acres, down 1 percent from last year. If realized, the United States planted area will be the third largest on record. Compared with last year, planted acreage declines of 100,000 acres or more are expected in Iowa, Kansas, Mississippi, Nebraska, and Ohio. If realized, the planted area in New York and North Dakota will be the largest on record.

All wheat planted area is estimated at 58 million acres, up 8 percent from last year. The 2011 winter wheat planted area, at 41.2 million acres, is 10 percent above last year and up 1 percent from the previous estimate.

Of this total, about 29.4 million acres are hard red winter, 8.2 million acres are soft red winter, and 3.7 million are white winter. Area planted to other spring wheat for 2011 is estimated at 14.4 million acres, up 5 percent from 2010. Of this total, about 13.6 million acres are HRS wheat.

Durum planted area for 2011 is estimated at 2.37 million acres, down 8 percent from 2010.

The USDA reported that on March 1 U.S. corn stocks of 6.522 billion bushels, which was a complete shocker to the market, as it came in 179 million bushels below the average trade estimate of 6.701 billion. The USDA confirmed U.S. corn demand is outpacing the level of supplies and a notable slowing in demand is needed during the 2nd half of the marketing year in order to maintain minimum ending stocks for 2010/11.

The USDA also reported on March 1 U.S. soybean stocks of 1.25 bb below the average trade guess of 1.299 bb and below the low end of the range of trade estimates. Compared to year-ago levels, soybean usage was 20 mb greater than expected and down by a likewise amount from a year ago.

The USDA’s wheat stocks projection was above the average trade guess at 1.420 bb versus the guess of 1.399 bb. Wheat usage was slower last year as stocks, as of March 1 a year ago, was 1.356 bb.

Hoops’ analysis: The real shocker from this report was the quarterly corn stocks number. The better-than-expected usage indicates the U.S. producer must increase corn-seeded acres by 4 million more acres than intended or it will not be enough to meet the growing and increasing demand for U.S. corn products.

Ethanol usage continues to increase and will not be very quick to shut down plants or slowdown production as end users are well hedged and as crude oil prices rise, profit margins remain positive.

New highs appear likely for the corn market and if any weather problems develop anywhere in the Corn Belt, a sharp price rise should be expected to ration demand.

CORN ANALYSIS

Corn closed the week $.46 1/2 higher. Texas corn planting, at 50 percent, is on par with average pace, Louisiana, at 85 percent , planted is 17 percent ahead of average while Arkansas, at 27 percent, is on par with average corn planting.

The weekly export sales report showed net sales of 1.9 million metric tons – a marketing-year high – were up noticeably from the previous week and from the prior four-week average.

Strategy and outlook: Producers are now sold/hedged on 80 percent of the 2010 crop and re-owned 35 percent 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 $.36 1/2 higher from last week. Net sales of 113,000 MT for delivery in 2011/2012 were for unknown destinations (105,000 MT) and Japan (8,000 MT).

This year’s export pace stands at 1.483 bb versus the USDA forecast of 1.590 bb.

Strategy and outlook: Producers have sold/hedged 70 percent of the 2010 crop and re-owned 35 percent of sales/hedges with at the money May call options after rolling up March calls.

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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