In the May 10 supply and demand report, the USDA projected that U.S. corn-ending stocks will climb to 2 billion bushels next summer, slightly higher than analysts had expected.

The estimate would mark the highest level of late-summer corn stockpiles in the U.S. since 2005. The USDA forecasted this fall’s corn harvest will total 14.1 bb, a 31 percent increase over last year, when the worst U.S. drought in decades weighed on production across the farm belt.

The government’s projected corn harvest would break the current record of 13.1 bb set in 2009. This was not a major surprise to the trade, in fact, the number could have been much worse. The USDA used a yield figure of 158 bushels per acre, down 5.6 bpa from its outlook forum figure due to the late plantings this spring. Still, this is much larger than last year’s 123.4 bpa yield.

The USDA also surprisingly increased corn exports to 1.3 bb, nearly double the 750 million bushels exported in 2012/13. Total usage is projected at 12.9 bb, up from 11.135 bb a year ago. The USDA said the expected large corn harvest likely would result in significant declines in the prices farmers would receive for their crops.

The government projected a season-average farm price for this coming harvest of $4.30 to $5.10 a bushel, down sharply from the record of $6.70 to $7.10 a bushel for corn harvested last fall. The government also projected world corn stockpiles of 154.63 million metric tons at the end of the next crop year. That would mark the greatest world corn stockpiles in more than a decade. For soybeans, the USDA also predicted that farmers will produce the largest-ever U.S. soybean crop. It forecasts a harvest of 3.39 bb, up from 3.015 billion last year. This assumes a yield of 44.5 bpa. Demand is projected at 3.264 bb with export demand at 1.45 bb, up 100 mb from the current export pace. This leaves soybean stocks of 265 million bushels next summer, above the average analyst prediction of 239 mb and the largest US stocks since 2006/07.

The USDA forecast 2013/14 world soybean reserves at a robust 74.96 mmt, well above estimates of 67.9 mmt and well above this year’s 62.46 mmt. This should serve as a reminder that the world could soon be awash in soy products.

CORN ANALYSIS

Corn closed the week $.25 lower. Last week, private exporters did not announce any private sales.

In the weekly export sales report, old corn sales are falling behind the pace needed to reach the USDA projection of 800 mb. Sales were only 4.6 mb, the lowest in seven weeks. New crop sales were also weak at only 6.7 mb. Last week, the USDA placed the national corn planting progress at only 12 percent completed. This compares to 69 percent last year and 47 percent on average. This is the second slowest planting pace on record, trailing only 1984. Traders remember 1984 as posting trendline yields. Texas is 70 percent and Missouri is 22 percent complete, with key growing states of Iowa 8 percent, Indiana 8 percent, Illinois 7 percent and Nebraska at 14 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 becomea concerned about yield losses. Rallies in the spring are good opportunities 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 are now 80 percent of 2012/13 crop and are also 40 percent sold of the 2013/14 crop. Sell 10 percent of the 2012/13 crop at $6.70 July and 10 percent of the 2013/14 crop at $5.80 March. They re-owned 50 percent of the 2012/13 corn crop with July calls, and bought December corn puts on 50 percent of 2013 production when December traded to $5.67.

SOYBEANS ANALYSIS

Soybeans closed the week $.11 3/4 higher from last week. Last week, private exporters reported sales of 225,000 mt of U.S. soybeans sold to China for the 2013/14 marketing year. In the weekly export sales report, old crop soybean sales improved to 7.1 mb, after two weeks of negative sales. New sales were strong at 14.4 mb, but should be strong next week with China buying beans this week.

Soybean plantings are just beginning with only 2 percent planted nationwide. The average is 12 percent done with 22 percent completed last year. Soybeans are under pressure from expectations that some corn acres could be shifted to soybeans this spring due to late planting conditions.

This is unlikely to occur as today’s farmers can plant corn later due to better yielding short season hybrids and plant faster due to improved machinery. Look for long term support on the weekly charts to hold until more is known about the growing season.

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