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BRIAN HOOPS

By Staff | May 3, 2013

CORN

U.S. producers should finish planting the 2013 corn crop by the end of the month and weather will then be 95 percent of the pricing influence. Ending stocks for the start of our harvest is projected at a 757 million bushels and the May 10 USDA monthly crop report looks to leave our old crop carryover stocks number unchanged as our export pace is poor, but should be factored into prices already.

After the report, weather will be the only thing left for traders to trade upon during the last half of the month. If weather is warm with ample moisture, prices will retreat into the end of the month and the highs for the month should be in by May 10. However, if weather becomes hot and dry, prices will have no choice but to trade higher in an attempt to ration U.S. ending stocks this spring.

The other wildcard is if China continues to be a buyer of U.S. corn. If the Chinese persistently buy our corn, the short funds will no doubt be aggressively covering their short positions. The month of May is too early to make annual highs if weather conditions are adverse as prices should peak during the June through August growing season.

With the uncertainty of the upcoming growing season, funds and commercials should look to buy weakness ahead of the key pollination timeframe in late June, just in case weather conditions become adverse.

SOYBEANS

The month of May is when U.S. producers begin to aggressively seed the 2013 soybean crop. Weather will become the number one pricing influence once 30 to 50 percent of the crop has been planted. With the ending stocks for 2013 projected at only 125 million bushels, the market has minimal room for error this growing season.

However, prices will become sensitive to weather issues during the summer as speculative shorts will look to cover aggressively if weather problems develop. As a result, the commodity funds and commercial entities will use weakness in prices during the planting season to buy September and November futures in anticipation of weather premiums being added as planting progress reaches the 50 percent pace. Prices should peak into the June through August growing season, as the market will fear dryness or heat or both at key yield time cutting production and lower carryover stocks even further.

The May 10th USDA monthly crop report looks to attract small buying ahead of it in case there is a surprise in the report. The only negative scenarios are the possibility increasing planted soybean acres this spring and of good growing conditions into the last half of the month. If weather conditions are favorable, look for prices to retreat and funds to liquidate long positions. The fundamentals determine price direction, so watch weather in the last half of the month.

CORN ANALYSIS

Corn closed the week $.06 1/2 lower. Last week, private exporters announced a 240,000 metric ton new crop corn sale to an unknown destination. In the weekly export sales report, corn sales totaled 13.2 mb. This is above the 8.3 mb that is needed to stay on pace with the USDA forecasts of 800 mb.

Last week, the USDA issued its first national corn planting progress report. Nationwide, only 4 percent of the corn crop has been planted compared to 21percent last year and 16 percent on average. This is the second slowest planting pace on record. Texas is 59 percent complete. Corn is struggling despite a wet spring that has slowed corn seedings across the corn belt. It is after May 10 that the trade will become concerned about yield losses. Rallies in the spring should provide an opportunity for producers to sell/hedge into as a weather threat during growing season is the only hope for a corn rally.

Strategy and outlook: Producers have sold 80 percent of the 2012/13 crop and 40 percent sold of the 2013/14 crop. They re-owned 50 percent of the old crop with July calls. Cover 50 percent of 2013 production with December puts when December trades to $5.67.

SOYBEANS ANALYSIS

Soybeans closed the week $.15 1/4 higher from last week. Last week, private exporters reported a sale of 110,000 mtsof U.S. soybeans sold to an unknown destination, 174,000 mt of soybeans to China and another sale of 392,000 mt of U.S. soybeans to China. In the weekly export sales report, soybean sales were 15.5 mb. This is well above the 0.2 mb that is needed to stay on pace with the current USDA forecast of 1.35 billion bushels. Look for long term support on the weekly charts to hold as this is the point where commercial buying should increase and gain strength. For producers wanting to re-own previous sales, this is an excellent opportunity.

Strategy and outlook: Producers have sold 80 percent of the 2012/13 crop and 40 percent sold of the 2013/14 crop. They re-owned 50 percent of 2012/13 production with July soybean calls. Cover 50 percent of 2013 production with November puts when November trades to $12.51.

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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