AdFarm has lots of friends: farmers, ranchers, media and a variety of ag professionals. One of our friends, Jody Miller,  is a market analyst at Northern Ag Incorporated (an affiliate of Midwest Futures, Inc.).  Jody and her husband Aaron farm in the Goodridge, MN area.

Tuesday morning, USDA released the Supply and Demand Report for February. The following is Jody’s commentary regarding the release of the report.

Soybeans

The soybean figures released were friendly as USDA lowered US soybean ending stocks by 35 million bushels which was a slightly larger number than what trade was expecting. Soybean exports have had a great year, and this is why we are looking at these current price levels.  But, despite the success with US exports, we should and will likely see levels drop off this year as we wait and watch the South American harvest get into full swing shortly.

Supportive news is coming from the biodiesel aspect of the market – but don’t look for that extra use to cause any tightness to stocks in 2010, but it could come more into effect in the out-years.

Corn

The US corn ending stocks figure came as the biggest surprise on the USDA report as trade was expecting to see an increase in ending stocks. Instead, we got a decrease of 45 million bushels.  This decrease came from an increase in food/seed/industrial use, an increase in ethanol use and domestic use.  These increases were partially offset by a decrease in export projections. Overall, the report was friendly to corn but we only saw a slightly higher finish on that day’s trading session.

It doesn’t appear that corn has definitely put in a market bottom, but with the huge drop the market has received since Jan 12 (the date of the last monthly S&D report) we should be able to see more of a bounce in prices to come.  It wouldn’t be out of the question to see the market bounce 30 cents off its recent lows but be cautious on expecting any further gains as the fundamentals remain bearish.

Wheat

The USDA report figures came as no surprise to the wheat market as both US and world stocks continue to grow, reaffirming the bearish stance taken on over the past month.  It appears that we are going to trade in the current range with a bias towards the downward side until we receive any weather news coming out of winter wheat country.  At that time, we will begin to focus on the 6 million fewer winter wheat acres that were planted last fall and the crop condition as it breaks dormancy.  But until then, expect wheat to migrate in a sideways to slightly lower pattern as we focus on bigger carryouts and slow demand.

The outside markets have been quite volatile lately as the US dollar has strengthened and energies have weakened.  Look for the outside markets to also play an influential role in grains over the next couple months as well.  The other big item that trade will be watching is to see what the extra 6 million acres will get planted to this year.  (Recall the 6 million fewer winter wheat acres that were planted in the fall of 2009.)  There are a lot of variables to watch this year and the markets show no signs of becoming dull!

As we look to 2010 – which crops do you think will be most promising?

Erin Jarolimek utilizes her connections in agriculture daily to help make her client’s work more insightful. You can reach her directly at Erin.Jarolimek@adfarmonline.com

http://usda.mannlib.cornell.edu/usda/current/CropProd/CropProd-02-09-2010.pdf