×
×
homepage logo

BRIAN HOOPS

By Staff | Apr 15, 2011

CORN

The month of March, was a bullish month for corn as it gained 74 3/4 cents from the previous month’s close. In the prospective plantings report, the USDA estimated U.S. producers would increase 2011 corn by nearly 4 million acres from last year to 92.178 million acres.

This will be the second largest seeded acres estimate in history, trailing only the year 1946. With the lower input values of corn, the profitability of corn will encourage additional acres of corn to be seeded this spring, unless a wet spring would prevent additional plantings.

Like the month of March, April will have commercial and seasonal traders buying weakness for a potential summer weather rally as the record-large demand base will have end users very nervous about weather and this year’s growing season.

U.S. producers will begin seeding corn acres by mid-April and weather will become very important to pricing by May. If the month of April is wet and hampers producers planting efforts, look for December corn to rally in an effort to entice producers to plant corn later, rather than switch acres to soybeans.

Currently, producers say they are about two weeks behind last year’s pace in terms of field work and preparation. The trade knows the U.S. farmer can plant corn more efficiently and faster than any other country and this two week delay can be overcome very quickly.

SOYBEANS

The month of March was bearish for soybeans as futures closed 18 cents lower in March compared to February.

In the prospective plantings report, the USDA estimated U.S. producers will plant 800,000 less acres in 2011 at 76.609 million. Producers do not appear willing to increase seedings more than this as profitability of soybeans versus corn favors corn at this time. The quarterly stocks report and world ending-stocks ensure the world has an adequate supply of soybeans and the market is not signaling to producers to increase seeded acres in 2011.

In the month of April, the soybean market has one simple job, to rebound and compete again with corn this spring so it does not lose any acres. In the acreage report, the USDA estimated the 2011 soybean acres at 76.609 million. This acreage forecast is the second largest in history.

In April, soybeans should find support from an effort to return to profitability to encourage farmers to not switch from corn to soybeans. Also, if the planting season is slowed by heavy rains, will encourage farmers to switch plantings of corn over to soybeans, therefore look for soybeans to maintain their premium to corn to ensure adequate supplies of soybean stocks.

WHEAT

It was a higher month for wheat prices in March as Chicago wheat closed the month 34 1/4 cents higher than the previous month. April is the month that the United States winter wheat crop is now in the key yield development timeframe.

Wheat has broken dormancy and will grow into the winter wheat harvest which starts in June. April and May are the months where winter wheat yields will be made or lost. As in any key yield development timeframe, if April brings little moisture, prices will soar. If there is plenty of rain, prices will fall. Our winter crop is about 70 percent of our total U.S. production, and goes mainly to the export market.

Kansas and Oklahoma are our two largest winter wheat states. Our spring wheat crop is currently being seeded and producers will finish in May. Spring wheat represents about one third of our U.S. production, and mainly goes to U.S. millers for domestic use.

As recently as 1996-97, U.S. producers seeded approximately 19 million acres of spring wheat. For 2011, the USDA is forecasting U.S. producers to seed 14.427 million acres this spring, up from 13.698 million one year ago. The large world ending stocks will be a limiting factor for wheat prices this spring as any loss of yield is made up for by the huge carryout levels.

Corn analysis

Corn closed the week $.32 higher. Last week, private exporters reported two private corn sales of 106,000 metric tons each. Texas corn planting at 50 percent 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.

This year’s net export profile is now at 1.507 billion bushels versus the USDA forecast of 1.95 bb.

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 $8.24.

Soybeans analysis

Soybeans closed the week $.01 1/2 lower from last week. Last week, private exporters did not report any private export sales.

The weekly export sales report showed net sales of 76,100 metric tons.

This year’s export pace stands at 1.483 bb vs. 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 $15.69.

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.

Please Enter Your Facebook App ID. Required for FB Comments. Click here for FB Comments Settings page