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Brie Walker

By Staff | Mar 28, 2014

According to a report from the Food and Agricultural Policy Research Institute, $4 corn and $10 soybeans will likely be the norm over the next 10 years.

FAPRI, based at the University of Missouri, projects a 4 million-acre decline in corn acreage this spring.

FAPRI also expects the bottomline for livestock producers will remain positive with the projected lower feed costs.

In 2014, net farm income is forecast to decline 24 percent from the record levels of last year.

CORN ANALYSIS

Corn closed the week 6 cents lower. Last week, private exporters reported sales of 107,400 metric tons of corn to Mexico and 340,000 mt of corn to Egypt.

Weekly export sales of corn showed a total of 29.4 million bushels. Total annual exports total of 1.534 billion bushels are now 94 percent of the current USDA export forecast.

The current pace is 93 percent of the newly updated USDA annual forecast. Corn has scored a technical breakout, but has failed to extend the rally as commercial selling limited gains.

If prices pullback, look for the commercials to become buyers as they will view pullbacks in the market as buying opportunities in the next two weeks with forecasts for a cool, wet spring across the key growing regions during the planting season.

Thus commercial entities as well as large speculators will want to be long ahead of the growing season. Highs for corn are likely to be scored during the summer with weather premium added in the spring.

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

Strategy and outlook: Producers are 100 percent sold of 2013/14 crop. Producers are 10 percent sold of the 2014/15 crop.

Sell nother 15 percent of new crop if December futures hit $5.24.

SOYBEANS ANALYSIS

Soybeans closed the week 18.75 cents higher from last week. Last week, private exporters reported sales of 120,000 mt of soybeans to China and 110,000 mt of soybean meal to an unknown destination.

Weekly export sales of soybeans showed 7.4 mb for old crop and bringing total commitments to 1.632 bb, and are 107 percent of the USDA’s new 2013/14 export projections.

The USDA is assuming foreign buyers will eventually cancel U.S. purchases in favor of cheaper South American product.

However, we have never seen net cancelations in the second half of a marketing year.

In the monthly NOPA crush report, February NOPA soybean crush was 141.6 mb, up 3.9 percent from last year.

The February crush was slightly above expectations of 140.9 mb.

The September-to-February crush totaled 933 mb, up 1 percent from last year. If wet growing conditions materialize this spring as forecast, corn will rally to buy acres as the market anticipate farmers will shift corn acres to soybeans.

The crop will eventually get planted, but a very wet forecast will likely limit the upside for soybeans.

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.

Strategy and outlook: Producers are 100 percent sold of the 2013/14 crop and should re-own 50 percent of the 2013/14 crop when prices reach $13.78.

Producers are 10 percent sold of 2014/15 production and sell another 15 percent if November futures hit $12.50.

This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department. Brian Hoops can be reached at (605) 660-1155.

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