In a research note this afternoon, MF Global Research Director Rich Feltes said grains markets are treading water right now, but the USDA’s crop report on Wednesday, March 11, could hold some interesting information. He notes a “consistent tendency” for the USDA to understate U.S. soybean demand on the March crop report and to a lesser extent, overstate corn demand.These trends “will hearten bull bean spreaders and leave corn bottom pickers prone to take small profit,” he said.

Feltes adds that corn, wheat and soybean prices are well below their respective 50 day moving averages.“Additionally, prospects for stable 2010 U.S. grain carryovers vs. ’09 and a significant gain in the 9/2010 U.S. soybean stocks do not present a compelling reason for either funds or end users to extend grain/oilseed longs until/unless ’09 growing season weather across N. America turns adverse,” he adds. 

Corn acreage is typically less than trade expectations, while soybean acreage is typically greater than the average trade guess. Bulls may argue that lower-than-expected corn acreage on the March report in concert with intensifying Ag Sec pressure to up ethanol blend in US gasoline is more than enough to stabilize corn market through month-end. Feltes addedthat MF Global research would agree if late March weather forecasts suggest wet/cool conditions across lower Midwest during FH April.However, an open FH April weather pattern would be more than enough to offset supportive ethanol/acreage chatter.Within 2-3 weeks, the corn market will be responding more to spring weather forecasts than vagaries in corn demand, he notes.

“Bottom line—more range trade near term.Fundamentals, anchored by dry U.S. HRW belt, lack of confidence in ’09 U.S. corn area, dysfunctional Argentine grain/oilseed export situation, tendency for final U.S. soybean demand to exceed expectations and tight farmer holding in the U.S. and PRC collectively suggest that breaks will be well supported, although upside potential is limited,” said Feltes.

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