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BRIAN HOOPS

By Staff | Mar 8, 2013

CORN

The first half of the month of March could produce mild strength as the trade will anticipate lower South American production figures today’s scheduled supply/demand report.

After the report’s release and into the end of the month, the trade will balance an expected friendly quarterly stocks report and a bearish prospective plantings report at the end of the month.

Traders are expecting an increase in planted acreage in the March 31 report of 1 to 2 million acres.

Commercial interests will view pullbacks in the market as buying opportunities with forecasts for a dry spring combined with existing western corn belt dryness could again produce below-trendline yields.

Thus commercial entities as well as large speculators will want to be long ahead of the growing season. Ample rainfall this summer will produce a break of corn below $4, or a lack of rain will see prices move above $8 as it won’t matter how many acres are planted, it will only matter that another drought is cutting yields.

As price levels rise, producers should be offsetting price risk by making cash sales and using options to manage the risk.

SOYBEANS

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 was tio be released today.

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 2013, look for prices to work lower after the report.

In the March 29 acreage report, the trade should be expecting an increase in U.S. soybean seedings of 500,000 to 1 million acres. If dry growing conditions materialize this spring, soybeans may pick up even more acres as farmers will shift corn acres to soybeans that do better in dry conditions than corn, especially corn-on-corn acres.

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 weather related event.

CORN ANALYSIS

Corn closed the week $.18 1/4 higher.

Last week, private exporters reported 127,000 metric tons of U.S. corn sold to an unknown destination.

In the weekly export sales report, corn sales shows 20.2 million bushels slated for 2012/13.

This is below the 12.1 mb that is needed to stay on pace with the USDA forecasts of 900 mb.

Corn found support at the end of February and rallied into early March. The rally could continue into the monthly supply/demand report.

It is widely anticipated ending stocks will significantly increase this year if the U.S. has a normal growing season.

Dryness in the western corn belt remains a corn’s best bet for a spring and summer rally.

Brazil did export 2.3 million metric tons of corn in February. The total for all of 11/12 (local marketing year) rests at 24.3 mmt, just above the USDA’s latest

figure.

Seasonally, Brazilian shipments are near zero in the March to June period. Informa raised total Brazilian corn production by 500,000 mt from its last estimate to 71.6 mmt, versus the USDA’s projected 72.5 mmt.

Strategy and outlook: Producers are now 80 percent sold of 2012/13 crop and are also 40 percent sold of the 2013/14 crop. The re-owned 50 percent of the 2012/13 corn crop with July calls. Exit if July trades at $7.05.

SOYBEANS ANALYSIS

Soybeans closed the week $.17 3/4 lower from last week.

Last week, private exporters announced total sales of 483,000 mt of U.S. soybeans to China and 120,000 mt of U.S. soybeans to an unknown destination.

In the weekly export sales report, soybean sales were a reduction of 43 mb. This is well above the 3.0 mb that is needed to stay on pace with the current USDA forecast of 1.345 billion bushels.

Brazilian trade date released showed January soybean exports at 959,633 mt and down 40 percent from a year ago.

Soymeal exports were little changed from last year at 669,675 mt, and monthly soyoil exports at 29,153 mt were the slowest January shipment rate since 1998.

Informa estimated the Argentine soybean crop at 51 mmt, which was down from the 54.5 mmt forecast last month.

Informa’s estimate is still 3 mmt over both the Rosario and Buenos Aires Exchange’s forecasts.

Strategy and outlook: Producers are 80 percent sold of the 2012/13 production and are 40 percent sold of 2013/14. They should re-own 50 percent of 2012/13 production with July soybean calls if July futures hit $13.75.

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. He can be contacted at 605-660-1155.

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