The other big surprise in today's report was the estimate of March 1 stocks of corn. At 6.01 billion bushels, March 1 inventories of corn were 514 million bushels smaller than last year's stocks and 150 million less than the average trade guess before the report.

This March 1 inventory estimate implies that corn consumption during the more recent winter quarter was very large or that earlier stock estimates for the current marketing year were too high. Our view is that the latter explanation is more likely to be true given livestock inventories, the depressing effect of warm winter temperatures on feed use, ethanol production to date, and strong basis levels.

In either case, the corn market must now seek a price that rations usage so that stocks at the end of the current marketing year at least exceed minimum pipeline levels by some reasonable amount. The market apparently had assumed that prices up to this point were sufficient to do the job.

March 1 stocks of soybeans were reported at 1.37 billion bushels, 78 million bushels larger than stocks of a year ago, but 9 million bushels smaller than the average trade guess. In view of the soybean production declines in South America this winter, the estimate of soybean stocks implies that more rationing of the 2011 crop may be required.

The overall picture that one gets from today's reports is a further tightening of the old crop supply/demand situation, and even with the sizable increase in overall planted acres in 2012, a glaring need for good U.S. yields in 2012 in order to rebuild stocks back to more adequate levels. Growing season weather will once again be crucial in 2012.