By ANN HINCH
Assistant Editor

CHICAGO, Ill. — Soybean futures on the Chicago Board of Trade saw an overall boost after last week’s USDA Grain Stocks report, while corn and wheat prices took a hit.

June 30 is traditionally a big day in new-crop news; it’s when the USDA’s National Agricultural Statistics Service (NASS) puts forth its best predictions about the year’s corn and soybean harvest. But this year’s Acreage report was met by double- and even triple-digit percentage changes in Grain Stocks’ projected ending stocks from this time last year.

At 597 million bushels, old crop soybean stocks were down 12 percent from June 2008, and down by more than half from the March 2009 estimate of 1.3 billion bushels.

The new crop estimate reflects that American farmers have planted 2 percent more acres of soybeans during 2008 – at 77.5 million acres, a record high.

Despite being tight on soybean stocks, the United States is not as low as analysts expected, said Brian Basting of Advance Trading, based in Bloomington, Ill. Still, he said the next 45-60 days will be critical for soybean health in the field.

“Whatever’s left out there has been kept in tight hands,” he said of existing stocks.

He added those same people will probably continue to hold old soybean stocks through the summer’s critical growing period, yet he believes it will be a struggle to get soybean prices a lot higher than they are now.

From all indications, Basting said China is continuing to stockpile and consume soybeans, steadily buying foreign crop – our market depends in part on how much more aggressive the country becomes in its purchasing. He speculated China won’t begin releasing from its strategic reserve of soybeans for another month, and noted there are decreases in other countries’ demand for soybeans.

There are other factors that play into the markets, too, such as oil prices and the value of the U.S. dollar. Basting pointed out oil market prices have doubled in the last few months, though the CME Group noted last Thursday that crude had dropped during the week, partly causing corn’s price drop. He also said the dollar looks like it is trying to stabilize and make a comeback in 2009.

That corn plantings are up this year defies a lot of conventional thinking, said Greg Wagner, an analyst with AgResource Co. of Chicago. The Acreage report shows planted ground 1 percent more than 2008, at 87 million acres, rather than the 85 million the USDA anticipated back in March.

“Despite the rise in the acres, there’s still a long way to go before we have a corn crop, here,” he said, pointing out there’s basically a two-tiered corn market – east of the Mississippi River and west.
Basting added the west had ideal corn-planting conditions this spring, while the Eastern Corn Belt’s was largely wet and late. Also, the USDA initially underestimated planting in this part of the nation, he said, and mused that it appears some of those few million acres “missing” from its March Prospective Plantings report have since been “found.” According to the Ohio Corn Growers Assoc. (OCGA), the USDA reported 72 percent of the U.S. corn crop was in good or excellent condition, compared to 61 percent in 2008. It also noted the June estimate of 153.4 bushels per acre may mean a production of nearly 12.3 billion bushels, the second-highest harvest ever.

“The weather wasn’t ideal to start the planting season, but you cannot discount the ability of Ohio farmers to get a crop in the ground,” said OCGA Executive Director Dwayne Siekman.
Actual planting in several corn-producing states is up from what the USDA expected in March, including 100,000 more acres each in Illinois, Michigan, Ohio, Minnesota and South Dakota; 500,000 acres more in Iowa; and 600,000 more in Nebraska.
Basting noted a good deal of corn in the Farm World area was late-planted and lagging in maturity. “We’ll need a bit of a late fall (harvest) again this year,” he said.

Both analysts were bearish on corn and soybean futures through 2009. Basting said feedstock demand will be affected by severe losses in hog markets and the struggling cattle and poultry industry.

“I’m concerned about the demand side for corn,” he said. Wagner added that consumer meat demand is down, moving into starch instead. He said what is needed is a return of consumer confidence, to eat better (i.e., more meat protein) and to eat out more again. He also said energy consumption kept high may help the ethanol industry.

Basting acknowledged ethanol is undergoing a slow healing process and its margins are beginning to “creep” back into positive territory – plants that six months ago might have shut down now have hope to stay open. “One of the astonishing features of the ethanol industry is that it has been able to maintain the same production” despite the economy, the credit crunch and lower gas prices, Wagner said, adding the USDA’s forecast looks good for the industry.

Basting said he is neutral on movement in wheat futures for 2009; last week, they fell. The USDA showed a 118 percent jump in wheat stocks higher than a year ago, now at 667 million bushels, and its Acreage report shows projected 2009 winter and spring wheat plantings down 5 percent from last year, at 59.8 million acres. In a statement, Lanworth, Inc. – a data analyst and mapping firm in Itasca, Ill. – said its pre-June 30 wheat estimate, significantly higher than the upper range of most analyst expectations, was supported by the USDA’s estimate.

It also boasted having anticipated corn and soybean planting numbers better than the market did, relying on “real-time satellite feeds delivered twice daily, extensive field sampling and sophisticated computer models of soil conditions, farming practices, weather and many other factors,” rather than farmer surveys.
“The market is now watching to see if the 3.5 million-acre increase in the total area planted to corn and soybeans forecasted by the USDA actually materializes over the course of the year,” stated Nicholas Kouchoukos, vice president of Lanworth information services.