Market Advisor: Long Awaited USDA Reports Released

The planting intentions and stocks reports released by USDA on March 31 were regarded by the trade as overall positive for corn prices, neutral to positive for wheat and negative for soybeans. Acres and stocks were below trade expectations for corn but above for soybeans. Spring wheat and especially durum acres were below expectations. All wheat stocks were also below trade expectations.

What does this mean for prices? Keep in mind that recent highs in May futures were up over a year ago by $4.85 for soybeans, $.90 for corn and $.89 for wheat in Minneapolis. New crop soybeans prices are subject to the greatest risk from a fundamental point of view followed by wheat and then corn. November soybeans could be under $6.00 at harvest with average or better yields.

So what should be done so far as pricing the 2004 crop is concerned? These are the highest prices seen in years and substantial profits are within reach.

Unless everything is gambled on a weather rally developing this summer, consider taking advantage of a price recovery in wheat and soybeans to get up to at least two-thirds sold of anticipated production. Consider selling even a higher percentage of soybeans.

Corn prices have fundamental and technical reasons to move higher. At this point, December futures have fundamental support at prices close to $3.00 although above average yields could push prices below that at harvest. On the upside, $3.60 December futures are a possibility. Consider scaling-up sales so that a high percentage of the crop is sold if $3.60 is reached.

Use futures fixed elevator contracts to sell the 2004 crop up to the level of production covered by crop revenue insurance. Beyond that level, the use of put options would be preferred since production risk is a concern as well as price risk.

Occasional adjustments to marketing plans will be necessary this year since stocks of all crops are so tight. Planting intentions and stocks are just two of the many reports that will be crucial to prices.

U.S. farmers intend to plant a lot more soybeans (2.7 percent) than a year ago and a little more corn (.3 percent) but less of everything else. North Dakota producers intend to increase planted acres of soybeans by 18 percent and corn by 10 percent.

Spring wheat intentions were down about 4 percent nationally and about 3 percent in North Dakota. For durum, intentions were down about 5 percent at both the U.S. level and in North Dakota.

Approximate decreases for the other crops relative to a year ago at the U.S. level were 12 percent for barley, 5 percent for dry edible beans, 11 percent for canola, 7 percent for harvested oats, 10 percent for oil sunflowers, and 16 percent for non-oil sunflowers.

Soybean stocks were above trade expectations by almost 5 percent while wheat stocks were below by almost 2 percent. Corn stocks were below expectations by only .1 percent.

Now that these reports are behind us, the trade will focus on other factors. The strong demand versus limited stocks situation for soybeans still needs to be resolved. Export commitments for soybeans were 96 percent of projected exports as of March 18 versus the five-year average of 85 percent. How this situation is resolved depends considerably on the final outcome of the Brazilian soybean crop.

Weather is presently critical for development of the winter wheat crop. The percentage of the hard red winter wheat crop that was rated good to excellent as of March 28 was 35 percent in Nebraska, 16 percent in Colorado, 37 percent in Kansas, 58 percent in Oklahoma and 30 percent in Texas. Compared to a year ago, the good/excellent ratings were 4 points higher in Nebraska but lower by 32 points in Colorado, 7 points in Kansas, 13 points in Oklahoma and 3 points in Texas.

The net effect of the USDA reports and other factors is that prices will be volatile in the months ahead. Many good selling opportunities should be offered by the market.