The monthly supply/demand report from the USDA held a bullish surprise for corn and a surprise that soybeans didn’t have a more bullish report.

For corn, the trade came into the report expecting the USDA could cut the export forecast and in turn, increase ending stocks.

What the USDA reported was a surprise to the trade as the USDA kept U.S. carryout unchanged from last month at 632 million bushels. It raised imports by 25 mb, raised feed/residual 100 mb and lowered exports to 825mb, the lowest yearly exports in over 40 years.

The USDA said higher-than-expected export competition from South America was the catalyst for lowering U.S. exports. Plus, it also cited a higher-than-expected import pace as the reason to raise imports.

For soybeans, the USDA surprised many in the trade by leaving the U.S. balance sheet completely untouched. Carryout was left unchanged from February at a snug 125 mb.

The USDA failed to revise exports or crush on the demand side, choosing instead to wait until a future report to address these issues.

The March USDA estimate has come in under the estimated final USDA forecast in 14 of the last 18 years.

The U.S. soybean crush is well ahead of last year’s pace and the USDA has the final crush well-below last year, indicating critical rationing needs must occur.

Argentina’s soybean production was lowered an expected 1.5 million metric ton to 51.5 mmt.

Brazil production was left unchanged at 83.5mmt. World carryout was raised slightly higher to 60.21 mmt.

For wheat, the USDA trimmed exports to 1.025 billion bushels and raised carryout by 25 mb to 716 mb.

Wheat feeding was left unchanged at 375 mb, but that could turn out to be larger in future reports as corn supplies get tighter and railroads establish feed wheat rates into feeding destinations.

U.S. SRW carryout was lowered to 118 mb, most likely reflecting additional feed usage away from HRW.

The report typically is not a major market mover, but this report did have some surprises that moved the market. The major market-moving report will occur at the end of the month with the quarterly stocks and acreage report.

This report is historically one of the four biggest crop reports of the year in terms of producing market moving information.

CORN ANALYSIS

Corn closed the week $.05 lower.

Last week, private exporters reported 100,000 metric tons of U.S. corn sold to an unknown destination.

In the weekly export sales report, corn sales shows 6.2 mb 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 technical support and rallied and also rallied after the supply/demand report.

This highlight of the report was the poor export pace of the corn market. It will take a long time to rebuild this export demand and unless another major producing country has a production problem, lower prices will be needed to improve demand for U.S. corn products.

The market should turn its attention to the quarterly stocks and acreage report at the end of the month.

This report should be bearish for 2013 planted acreage, but the last quarterly stocks report was bullish.

Strategy and outlook: Producers are now 80 percent of 2012/13 crop and are also 40 percent sold of the 2013/14 crop. They 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 $.27 1/2 higher from last week.

Last week, private exporters announced total sales of 345,000 mts of U.S. soybeans to China and 330,000 mts of U.S. soybeans to an unknown destination.

In the weekly export sales report, soybean sales were a reduction of 50.8 mb.

This is well above the 2.7 mb that is needed to stay on pace with the current USDA forecast of 1.345 bb.

Soybeans have tried to rally, but so far has failed to sustain a meaningful break above the $15 mark.

Soybeans appear locked into a trading range of $15.05 to $14.10 on the downside. With the strong demand trends, a move above $15.05 seems likely with $15.70 the next major resistance for the soybean market.

South American hedge pressure is picking up as harvest in Argentina and Brazil gains momentum.

Strategy and outlook: Producers are 80 percent sold of the 2012/13 production and are 40 percent sold of 2013/14. 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.