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Lower feed usage boosts corn stocks, surprising market
 
The quarterly stocks data in the March inventory report shocked the market. Corn stocks as of March 1 totaled 5.4 billion bushels, 400 million more than expected. Soybean stocks were also slightly above trade estimates, at 1 billion bushels.

Wheat inventory on March 1 was also slightly larger than expected, at 1.23 billion bushels. These numbers heavily pressured the old-crop contracts.

The acreage numbers were more in line with what trade was expecting. Corn acres this coming year are forecast to total 97.3 million, equal to trade estimates, and 200,000 more than a year ago.

Soybean plantings are pegged at 77.1 million, 1.2 million under the average estimate, but equal to those of last year. Wheat plantings are estimated at 56.4 million, in line with trade estimates and 700,000 above a year ago.

Of all of these figures, the one getting the most attention is the corn stocks. The larger corn inventory caught trade by surprise. This was from a lower-than-expected feed usage estimate. Simple math tells us old-crop carryout will now be closer to 1 billion bushels this year, which is not a bullish number.

As we approach the spring planting season, we are hearing more talk on potential acres. While the general consensus is we will see more corn acres this year, the amount is being questioned.
Some producers across the Corn Belt are not pleased with corn-on-corn yields, and will shift at least a portion of their acres back to soybean production. Others claim the price spread between corn and soybeans will make the decision to plant corn much easier.
What may the greatest decision-maker when determining new-crop acres is weather. While most parts of the Corn Belt have welcomed recent precipitation, some regions are becoming concerned with excessive moisture.

These are mainly the Deep South and the far Upper Plains. It is not out of the question that if delays do in fact take place in these areas, we could see a shift from corn to soybeans or other crops with shortened growing seasons.

Much of the talk in the market recently surrounding weather has been how soil conditions have improved across the Corn Belt this winter. While this may in fact be true, history shows there is little correlation between winter weather and weather during the growing season.

The precipitation we have received in recent weeks has been well under what is needed to fully recharge moisture levels ahead of the spring planting season, as well. This is keeping an elevated amount of risk premium in the market, even with the change in weather patterns.

There are more concerns with planting delays than just what they may mean for acreage. If planting is delayed far enough, it could lead to a later harvest season as well.

This is more of an issue for soybeans, as the United States stands a legitimate chance of depleting those reserves, even with a normal harvest time. Trade is less concerned with this than they would be in a normal year, given the record soybean production that is expected for South America.

The latest cattle on feed report is giving the market mixed indications. As of March 1 the United States had 93 percent of the cattle in feedlots that it had a year earlier. Placements are down considerably, though, with just 86 percent of last year’s cattle entering the lots in February.

This brings into question the USDA’s large estimate for feed use in its balance sheets.

Karl Setzer is a commodity trading advisor/market analyst at Maxyield Cooperative. His commentary and market analysis is available daily on radio, in newsprint and on the Internet at www.maxyieldcooperative.com

The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary obtained from various sources are believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position.
4/4/2013