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BRIAN HOOPS

By Staff | Apr 5, 2013

The March 28 quarterly stocks and acreage report was bearish for the market, especially for corn, as the USDA shocked the trade by increasing stocks.

Going into the report, the trade had braced for a surprise as this report has typically been one of the three largest market-moving reports of the year.

The surprise came in the form of a quarterly stocks figure of 5.399 billion bushels, well above the average pre-report trade guess of 5.03 bb.

Even giving the USDA the benefit of the doubt, it is hard to explain how the USDA, in the 1st quarter of the year, projected a 13 percent feed usage increase, which was reflected in the January report.

Even harder to explain, the USDA projects a decrease in feed usage of 30 percent for the second quarter.

Soybean stocks were also bearish, but not as much as corn, with stocks at 999 million bushels, above the average pre-report guess of 935 mb.

Wheat stocks were 1.234 bb versus estimates of up to 1.177 bb.

The good news from the report was corn and soybean stock were still below year-ago levels. For 2013 seedings, the USDA forecast U.S. corn growers to plant 97.3 million acres of corn for all purposes in 2013, up slightly from last year and 6 percent higher than in 2011.

If realized, this will represent the highest planted acreage in the United States since 1936 when an estimated 102 million acres were planted. This was not a surprise to the trade, infact, last fall estimates as high as 100 million seeded acres were common place.

Soybean planted area for 2013 is estimated at 77.1 million acres, down slightly from last year, but the fourth highest on record, if realized.

Compared with 2012, planted area is down across the Great Plains with the exception of North Dakota. Nebraska and Minnesota are expecting the largest declines compared with last year, while Illinois and North Dakota are expecting the largest increases.

All wheat planted area for 2013 is estimated at 56.4 million acres, up 1 percent from 2012. The 2013 winter wheat planted area, at 42 million acres, is 2 percent above last year and up slightly from the previous estimate.

Of this total, about 28.9 million acres are hard red winter, 9.67 million acres are soft red winter, and 3.39 million acres are white winter.

Area planted to other spring wheat for 2013 is expected to total 12.7 million acres, up 3 percent from 2012.

Of this total, about 12.1 million acres are hard red spring wheat.

Producers with old crop inventories will no doubt be willing to part with product if a rally during the planting timeframe lifts values back near the March highs. Rallies during planting are usually limited in appreciation as its summer weather that can sharply rally values.

CORN ANALYSIS

Corn closed the week $.31 lower. Last week, private exporters did not report any private sales.

In the weekly export sales report, corn sales shows 12.4 mb slated for 2012/13. This is above the 10 mb that is needed to stay on pace with the USDA forecasts of 825 mb.

Last week, Texas corn plantings jumped to 42 percent complete from 29 percent last week. This is well ahead of last year’s pace of 31 percent and the average pace of 33 percent.

Southern producers are taking advantage of early planting conditions with Louisiana at 56 percent seeded, Mississippi at 13 percent done and Georgia at 5 percent.

The upside for corn has been limited with the USDA’s surprising find of 5.399 bb in the quarterly stocks report.

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.

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.

SOYBEANS ANALYSIS

Soybeans closed the week $.35 3/4 lower from last week. Last week, private exporters reported a sale of 234,000 metric tons of U.S. soybeans to China.

In the weekly export sales report, soybean sales were 24.8 mb. This is well above the 1.5 mb that is needed to stay on pace with the current USDA forecast of 1.345 bb.

Soybeans remain range-bound with beans locked into a trading range of $14.95 on the upside and $13.70 on the downside.

With the strong demand trends and the spring growing season approaching, look for commercial demand to improve as the market approaches the long-term support zone.

South American hedge pressure is picking up as harvest in Argentina and Brazil gains momentum. This should limit the upside until the spring growing season is able to rally the market.

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