 "The USDA's March 30 Grain Stocks and Prospective Plantings
reports will also provide important fundamental information for
both markets," Good said. "Anticipating the level of March 1
stocks has become increasingly difficult over the past year or
more. For corn, the difficulty lies in the erratic levels of
implied quarterly feed and residual use since the spring of
2010. Stocks reports since then have provided a number of
surprises.
"In the newsletter of March 5, some estimates of corn
consumption during the December-February quarter this year and
implications for March 1 stocks were outlined. A case can be
made for stock levels in a wide range, but inventories within a
few million bushels of 6.35 billion bushels would be consistent
with the USDA's projection of feed and residual use for the
year," he said.
Good explained that in the case of soybeans, the difficulty
in anticipating stock levels is less pronounced but stems from
the discontinuation of the monthly Census Bureau report of the
domestic crush. Estimates of the monthly crush are reported by
the National Oilseed Processors Association for its members, but
not all processors are members.
"With exports for the quarter known, the quarterly stocks
estimate will reveal total domestic disappearance, including
seed, feed and residual use, as well as the crush," Good said.
"We anticipate March 1 stocks near 1.365 billion bushels. For
both corn and soybeans, stock levels that deviate substantially
from market expectations would have at least a short-term price
impact."
The Prospective Plantings report will contain important
information about the potential size of the 2012 crops even
though actual plantings may deviate from intentions, Good said.
In combination with the report of winter wheat seedings released
in January, the report will provide an indication of the
magnitude of total planted acreage in 2012. With substantial
prevented plantings last year, acreage intentions this year
could be much larger than actual plantings last year. High
commodity prices, generally favorable early planting conditions
and a reduction in CRP acres could contribute to that increase.
"The report will obviously reveal planting intentions for
individual crops, providing more insight into prospective crop
size," Good said. "There is general consensus that corn
plantings will increase by 2 to 3 million acres, but less
consensus about acreage of other crops."
He added that a larger percentage of planted acres will be
harvested in 2012 than in 2011 if weather conditions this summer
are more normal.
The report will also reveal the geographic location of
intended changes in acreage of individual crops, which might
influence expectations about the potential U.S. average yields.
"Surprises in the report should be expected, with the
magnitude of total planted acreage having the largest potential
for a surprise," Good said.
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Beyond the March 30 reports, spring weather and planting conditions
will be important. Early planting (or more correctly, lack of late
planting) of the corn crop could have some yield implications, but
may be more important for the timing of harvest in the Corn Belt.
Good said that if March 1 stocks support prospects for small
year-ending stocks, an earlier-than-normal harvest in the Corn Belt
would alleviate some of the concerns about the small inventories.
The USDA will update the forecast of year-ending stocks in the
April 10 WASDE report. Forecasts of much colder weather in the week
of April 2 may have some implications for planting progress. The
USDA's first weekly Crop Progress report will be released on April
2. Individual state reports reveal substantial planting progress in
the South.
"So much uncertainty about stocks, consumption and production
makes pricing decisions difficult, particularly for the 2012 crop,"
Good said. "Soybean prices have rallied sharply from the January
lows and appear to be pricing in a smaller South American crop,
unchanged to declining acreage in the United States and smaller
stocks by the end of the 2012-13 marketing year.
"November futures are well above the spring price guarantee for
crop revenue insurance, with some looking for a move back to $14,"
Good said. "Some price protection seems prudent with prices well
above insurance guarantees."
In contrast, Good said December corn futures have declined to
near the January lows and are below the insurance price guarantee,
in anticipation of a large crop and rebuilding of inventories during
the year ahead.
"More patience may be warranted in making additional new-crop
sales of corn," Good said.
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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