Corn & Seed/Oil Commodities

[mikey]

Saturday, October 17, 2009
Weekly Review: Record High 2009 Soybean Crop Estimated
US - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.

 
Ron Plain
The October estimate of the 2009 corn crop is for a production of 13.018 billion bushels -- quite close to the record of 13.038 billion bushels in 2007. The estimated yield for corn in 2009 is 164.2 bushels per acre -- a very substantial increase from the previous record of 160 bushels per acre.

The USDA midpoint estimate for corn prices is $3.30 per bushel, the same as a month earlier but down $0.76 per bushel from the 2008-09 marketing year.

The 2009 soybean crop is estimated to be a record high 3.25 billion bushels. The USDA midpoint estimate for bean prices is $9.00 per bushel, down from $9.97 per bushel in the 2008-09 marketing year.

The midpoint estimate for soybean meal prices for the 2009-10 marketing year is $275 per ton compared to $331.17 per ton a year earlier.

These lower feed prices will reduce the cost of producing hogs by $3-4 per cwt but not nearly enough to erase the red ink of the past year. Therefore, the breeding herd needs to be reduced substantially more than the reductions in the 1 September report.

For the last couple of weeks, gilt and sow slaughter data is not positive for an increase in the rate of decline in the breeding herd.

Pork exports in August were down 18.4 per cent from a year earlier. For January-August pork exports were down 19.2 per cent from 12 months earlier. Pork imports for January-August were down 2.3 per cent form the same months in 2008. However, even with the smaller imports the net pork exports as a per cent of production were 14.1 per cent, down from 17.8 per cent in 2008.

The value of pork exports per hog slaughtered for January-August at $38.46 per head is down from $42.11 per head for the same period last year.

The average live weight of barrows and gilts last week in Iowa-Minnesota was 268.9 pounds per head, up 0.5 pound from a week earlier and up 3.2 pounds from a year earlier.

Pork product cutout bucked the seasonal trend this week with an increase of $3.33 per cwt and amounted to 56.20 per cwt. Loins at $68.85 per cwt were up $1.61 per cwt, Boston butts at $59 per cwt were up $2.96 per cwt, hams at $47.68 per cwt were up $6.48 per cwt, and bellies at $66.85 per cwt were down $0.01 per cwt from a week earlier.

National feeder pig prices last week were generally steady. The average price for 50-54 per cent lean pigs weighing 10 pounds was $30.90 per head and 40-pound pigs were 31.89 per head. The formula-price for 10-pound pigs averaged $33.96 per head and for 40-pound pigs averaged $44.96 per head. The negotiated or cash price for 10-pound pigs averaged $25.42 per head and 40-pound pigs averaged $30.71 per head.

The prices for live slaughter hogs Friday morning were $0.50 per cwt higher to $1.00 per cwt lower compared to a week earlier. The weighted average negotiated carcass prices were $0.42 to $0.98 per cwt higher compared to seven days earlier.

The live prices Friday morning were: Peoria $29 per cwt, Zumbrota, Minnesota, $31 per cwt, and interior Missouri $35 per cwt. The weighted average negotiated carcass prices by area Friday morning were: western Cornbelt $49.07 per cwt, eastern Cornbelt $47.15 per cwt, Iowa-Minnesota $49.20 per cwt and nation $47.93 per cwt.

Slaughter this week under Federal Inspection was estimated at 2295 thousand head, down 2.6 per cent from the same week in 2008.

[mikey]

China’s CNGOIC cuts corn output forecast
[19 October 2009] China National Grain and Oils Information Centre (CNGOIC) has lowered its forecast for the country's corn output in 2009 to 163 million tonnes, a drop of 2.92 million tonnes or 1.8% from last year, due to severe drought in the country's major growing areas in the northeast. The adjusted figure - down 2.5 million tonnes from September estimate - was still higher than USDA estimates and other industry bodies that put it at 160 million tonnes or below. "Northeast areas will see a fall in output while the provinces in north China will produce more than last year," said an official at the centre.

[mikey]

Tuesday, November 03, 2009Print This Page
Weekly Outlook: Harvest to Accelerate
US - The late planted and late maturing corn and soybean crops of 2009 have also experienced one of the slowest harvest rates in modern history, writes Darrel Good, agricultural economist at the University of Illinois.



For corn, an average of 58 per cent of the crop had been harvested by that date in the previous 5 years. Excluding the slow pace of 2008, the average for that date was 63 per cent harvested. For soybeans, the previous 5-year average harvest pace for that date is 80 per cent. The rate of harvest relative to the previous 5 year average pace varied considerably by state and within states. The slowest pace of corn harvest was in Illinois, with only 14 per cent harvested as of 25 October, compared to the previous 5 year average of 77 per cent. The per cent of the crop harvested ranged from 3 per cent in the northeast crop reporting district to 38 per cent in the southwest district. Excluding 2008, the previous average harvest completion by that date was 85 per cent. Harvest was at a more normal pace in the southern states of North Carolina, Tennessee, and Texas. Soybean harvest was especially slow in Illinois, Iowa, Minnesota, North Dakota, and South Dakota. The pace of harvest was near normal in Ohio.

Some additional harvesting occurred during the week ended 1 November, but the pace was likely very slow. The per cent of the crop harvested will be reported in the USDA’s Crop Progress report to be released on 2 November. The current week may result in the fastest pace of harvest so far this year. The Midwest is expected to be generally rain free, allowing harvest to pick up speed as the week progresses. The pace will vary geographically, reflecting various levels of precipitation received last week.

For corn, the most rapid weekly rate of harvest in recent years has resulted in 16 per cent of the crop being harvested. Those peak weeks tended to be in the middle of harvest when the majority of farms were still harvesting. The harvest rate declined as more producers completed harvest. Assuming only about 25 per cent of the crop was harvested as of 1 November, a harvest pace of 16 per cent per week would require almost 5 weeks to complete the harvest. Since the pace cannot be maintained at 16 per cent per week, it appears that harvest will stretch into at least mid-December, depending on future weather conditions. The pace of harvest will also be influenced by the rate at which the crop can be conditioned for storage and shipping. Areas with a majority of the crop still at high moisture levels could experience some delays due to limited drying capacity.

For soybeans, the peak weeks of harvest in recent weeks have seen 20 to 24 per cent of the crop harvested. With perhaps 50 per cent of the crop harvested by 1 November, it still appears that harvest could extend into December, depending on weather conditions after this week.

The delayed harvest due to wet conditions raises several issues about the quantity and quality of the 2009 crop, particularly the corn crop. More widespread disease outbreaks, low test weights, above average field losses, and quality deterioration due to drying and handling a crop with high moisture levels have all been cited as potential problems. In addition, extreme weather conditions in some areas may result in more than the average amount of unharvested acreage.

The USDA’s 10 November Crop Production report will provide an important benchmark for judging the yield impacts of poor harvest conditions. The impact of a poor quality crop will be revealed over a longer period of time. Typically, the impact of corn quality on livestock feeding rates could be evaluated based on the 1 December inventory of corn, with higher feeding rates associated with poor quality. With more than the normal amount of the crop likely to be unharvested by 1 December, the estimate of December 1 stocks may be less reliable than in a more normal year. The 1 March inventory estimate, then, becomes more important.

For soybeans, the wet growing season in many areas along with higher moisture levels at harvest, may affect the relative meal and oil content of the crop. The industry will have information on relative yields immediately, but the monthly Census Bureau estimates of soybean crush and product yield will reveal the overall impact.

The impacts of late harvest and poor quality crops on production and use are often over estimated. It appears that may have been the case this year, with prices of both corn and soybeans dropping sharply with the forecast of more favorable harvest conditions. However, this year’s growing and harvest season weather conditions are outside the experience of modern history. More time will be required to fully evaluate the impacts.

[mikey]

Monday, November 16, 2009Print This Page
Weekly Outlook: Soybean and Corn Crop Forecasts
US - The USDA's November Crop Production report forecast the size of the 2009 US soybean crop at 3.319 billion bushels, 69 million bushels larger than the October forecast, writes Darrel Good, agricultural economist at the University of Illinois.



The 2009 corn crop is forecast at 12.921 billion bushels, 97 million bushels smaller than the October forecast,

The US average soybean yield is now forecast at 43.3 bushels per acre, 0.9 bushels higher than the October forecast. The largest month-over-month increase in average yields came in Indiana and Kansas. Those yield estimates were increased by 3 bushels. Average yield estimates were lowered for some southern states, including Arkansas, Georgia, Mississippi, and Texas, and for Iowa. The US average yield forecast is 1.1 bushels below the average of forecasts based on our crop weather and crop condition models.

The USDA also increased the expected size of the 2010 harvest in Brazil, Argentina, Paraguay, Bolivia, and Uruguay. The South American harvest is now forecast at 4.623 billion bushels, 80 million bushels larger than the October forecast and 1.113 billion larger than the drought reduced harvest of 2009. The largest increase is expected in Argentina. The strengthening of the El Nino weather pattern bodes well for South American growing season weather in spite of some early season dryness in parts of Argentina.

The USDA increased the forecast of 2009-10 marketing year soybean exports by 20 million bushels and the forecast of the domestic crush by 5 million bushels. The larger export forecast reflects expectations of larger imports by China and the European Union, offsetting larger South American exports. The larger crush forecast reflects expectations of a slightly lower yield of soybean meal per bushel of soybeans. The forecasts of soybean oil and meal consumption were not increased.

Year ending stocks of soybeans are now projected at 270 million bushels, 40 million larger than the October forecast. However, the marketing year average farm price is expected to be between $8.20 and $10.20, $.20 above the October forecast.

For corn, the 2009 US average yield is now forecast at 162.9 bushels, 1.3 bushels below the October forecast. State average yield forecasts were lowered by 5 bushels in Illinois, Iowa, and Mississippi. Yield forecasts were increased for Colorado, Kentucky, Minnesota, Tennessee, and Washington. The US average yield forecast is two bushels less than the average of forecasts based on our crop weather and crop condition models.

The USDA reduced the forecast of 2010 corn acreage, yield, and production for Brazil. Production there is now forecast at 2 billion bushels, 39 million below the October forecast, but equal to the 2009 harvest. Conversely, the forecast of the South African harvest was increased by 39 million bushels. That crop is forecast at 453 million bushels, 49 million less than the previous harvest.

The forecast of 2009-10 marketing year US corn exports was reduced by 50 million bushels, to a total of 2.1 billion bushels. This is the second consecutive month for a lower forecast and reflects the slowing pace of export sales and increased competition from feed wheat. Year ending stocks of US corn are forecast at 1.625 billion bushels, 47 million below the October forecast. The 2009-10 marketing year average farm price of corn is forecast in a range of $3.25 to $3.85, $.20 above the October forecast.

The 2009 US wheat harvest is now forecast at 2.216 billion bushels, just 4 million below the previous forecast resulting from a slightly smaller estimate of the spring wheat harvest. The projection of 2009-10 marketing year exports were dropped 25 million bushels, reflecting prospects for increased competition from larger wheat supplies in Russia, Kazakhstan, and the Ukraine. Year ending stocks are projected at 885 million bushels, 21 million larger than the October projection and 228 million larger than stocks at the start of the year.

The USDA will release final estimates of the size of the 2009 US corn and soybean crops in the second week of January 2010. Price patterns will now reflect the pace of harvest, which has accelerated rapidly over the past 10 days, the progress of South American crops, and perceptions about the strength of demand. The declining value of the US dollar, higher crude oil prices, and advances in the stock market have been encouraging for demand prospects. Still, soybean prices appear to be a bit over valued in light of the large South American crop prospects. Particularly puzzling is the movement from an inverse to a small carry in the futures price structure given prospects for large supplies next spring.

[mikey]

Weekly Outlook: Crop Prices Remain Firm
US - Corn and soybean prices continue to trade in a relatively wide range, but are currently near the highs of the past 10 weeks. Basis levels have weakened some as harvest accelerated, writes Darrel Good, agricultural economist at the University of Illinois.



The average cash price of corn in central Illinois peaked at $3.83 on 22 October, declined to $3.41 on 6 November, and stood at $3.62 on 13 November. That price had dipped under $3.00 in early September. The average cash price in central Illinois was $.28 under December futures on 13 November, compared to about $.15 under four weeks earlier. Corn prices have been supported by ongoing harvest delays as well as expectations that demand for corn-based ethanol will remain strong in the months ahead. Ethanol prices have moved sharply higher since late September, supported by very favorable blending margins. Reduced imports of Brazilian ethanol and some exports of US ethanol have contributed to those margins. The EPA ruling on increasing the limit on blending from 10 per cent to up to 15 per cent will be important for determining domestic market size moving forward. It appears that the self-imposed deadline of 1 December 2009 for making that decision will not be met.

The level of corn export sales in recent weeks has been disappointing. Sales averaged only 16.3 million bushels per week for the four weeks ended 5 November. Sales need to average well over 30 million per week in order to meet the current marketing year export forecast of 2.1 billion bushels. Weekly export inspections averaged 26.5 million bushels per week during the five weeks ended 12 November. Shipments now need to average nearly 42 million bushels per week through August 2009 in order to reach the current USDA projection.

The jury is still out on the likely level of feed and residual use of corn this year. Some analysts believe that the generally poorer quality crop will result in higher rates of corn feeding, while others believe the poorer quality will lead to higher levels of feeding of other ingredients, particularly soybean meal. Initially, the large supply of low priced corn screenings might result in at least a normal rate of corn feeding per animal. It is still almost two months before the 1 December corn stocks estimate will be available. That estimate will allow a calculation of feed and residual use of corn during the first quarter of the 2009-10 marketing year.

The average cash price of soybeans in central Illinois dropped below $9.00 in early October, peaked at $9.96 on 21 October, and stood at $9.635 on 13 November. The average cash price on 13 November was $.29 under March 2010 futures, compared to about $.11 under three weeks ago. Soybean prices have been supported by a rapid pace of exports and export sales. Through 5 November, export commitments (exports plus outstanding sales) stood at 68.5 per cent of the total exports projected for the marketing year. For the four weeks ended November 5, new sales averaged about 31 million per week. To reach the USDA projection, new sales now need to average about 10 million per week. For the five weeks ended 12 November, USDA export inspections averaged 55.8 million bushels per week. Shipments need to average about 23 million per week for the rest of the year to reach the USDA projection. The Census Bureau estimate of September 2009 exports was about 5 million bushels above the USDA estimate, indicating that USDA estimates may lag Census Bureau numbers this year, as has been the case in recent years. Export demand for US soybeans will be concentrated in the first half of the marketing year and is expected to drop sharply with the availability of the South American harvest.

The domestic soybean crush was extremely small in September, but the National Oilseed Processors Association estimates showed a sharp rebound in October. The October 2008 crush estimate exceeded that of a year ago. Part of the increase in crush reflects a lower yield of both oil and meal from this year’s soybean crop. In addition, the larger crush resulted in a sharp increase in soybean oil stocks. If confirmed by the Census Bureau crush estimate, the October crush figure suggests that the 2009-10 marketing year crush could exceed the current USDA forecast. At this juncture, however, the larger crush seems to reflect lower product yield more than an increase in consumption.

Prices of corn and soybeans have also been supported by a low valued US dollar and strength in the financial markets. A low valued US dollar may result in importers being able to pay a higher price for US commodities, but there is no historical statistical relationship between the value of the US dollar and the volume of marketing year exports.

Corn and soybean prices may be well supported in the near term by another round of harvest delays. Strong demand for corn for ethanol may also provide longer term support. At some point, however, the soybean market may suffer from a very large South American harvest.

[mikey]

Tuesday, December 01, 2009Print This Page
Weekly Outlook: More to Corn, Soybean Demand?
US - The recent strength in crop prices has been lead by soybeans, writes Darrel Good, agricultural economist at the University of Illinois.



The rapid pace of exports and export sales has been the primary factor supporting soybean prices, but a number of factors are influencing both corn and soybean prices.

As of 26 November 2009, the USDA reported that 473 million bushels of soybeans had been inspected for export, 118 million more than the total of a year earlier. As of November 19, 579 million bushels of soybeans had been sold for export, but not yet shipped. Outstanding sales on the same date last year totaled only 328 million bushels. The year-over-year increase in export commitments reflects much larger purchases by China. Total export commitments to China as of November 19 stood at about 614 million bushels, compared to 328 million on the same date last year. A slightly smaller soybean harvest in China this year, a much smaller soybean harvest in South America, and a policy of increasing inventories in China account for much of the year-over-year increase in Chinese demand for US soybeans. The pace of Chinese purchases of US soybeans is expected to remain strong over the next several weeks.

The domestic soybean crush in September 2009 was the smallest for that month since 1997, reflecting the small inventory of old crop soybeans and the late harvest of the 2009 crop. For October 2009, the Census Bureau reported a record large crush for the month, exceeding the previous record of 2006 by about 1.3 million bushels. Cumulative crush for the first two months of the 2009-10 marketing year is estimated at 276.4 million bushels, 600,000 bushels (0.2 per cent) above the total of a year ago. The USDA has projected the 2009-10 marketing year crush at 1.695 billion bushels, 33 million (2.0 per cent) larger than the crush of last year.

The apparent disappearance of soybean meal (domestic plus exports) during October totaled 3.637 million tons, 182,000 tons more than in October 2008. The larger disappearance this year may reflect some rebuilding of inventories at locations other than processing plants. The November figure will provide a clearer picture of the actual consumption pace. Apparent soybean oil consumption during October 2009 totaled a record 1.854 billion pounds, 44.5 million pounds more than during October 2008.

For corn, the sharp increase in ethanol prices since late September, along with the extremely late harvest, has provided support for prices. The average price of ethanol at Iowa plants, as reported by the USDA Market News, was $2.05 per gallon on 27 November, compared to $1.51 on September11, 2009. The higher prices reflect favorable blending economics and have resulted in strong demand for corn by ethanol producers.

The pace of corn export sales and export inspections has generally been disappointing for much of the first quarter of the 2009-10 marketing year. The USDA has lowered the projection of marketing year exports by 100 million bushels since September. New sales need to exceed 32 million bushels per week to reach the current USDA export projection of 2.1 billion bushels. For the seven weeks ended November 12, new sales averaged less than 18 million bushels per week. However, new sales jumped to 48 million bushels during the week ended November 19 on the strength of large sales to Japan and Mexico. Japan is the largest and most consistent importer of US corn, but the pace of sales to Japan has been slow so far this year. As Japan “catches up” on purchases, the US sales pace should continue to improve.

While the late, slow harvest and a solid rate of consumption explain much of the recent strength in corn and soybean prices, those factors do not appear to explain all of the strength. The market is well aware, for example, that the pace of US soybean exports and export sales will slow dramatically by the spring of 2010. The seasonal decline may be much sharper than normal due to prospects for record South American production. The lack of profitability in the domestic production of livestock and livestock products and the sharp increase in availability of distillers grains points to weak feed demand for corn and soybean meal. In addition, corn and soybean acreage in the US will likely increase in 2010 as a result of fewer acres of wheat and expired Conservation Reserve Program contracts. The large carry in the corn futures market (8.5 per cent from December 2009 to July 2010) and a positive carry in the soybean market in the face of a record South American crop in 2010, suggest the markets are anticipating a sizeable increase in the rate of inflation in 2010. Historically, the rate of inflation has not provided prolonged support for crop prices. Those prices must eventually reflect production, consumption, and inventories of the individual crops.


 

[mikey]

 US trade team seeks to reclaim hold in Philippine market
[8 December 2009] An 11-man team from the US is in the Philippines to try to regain its market in the Philippines for soybean meal. The group, composed of soybean farmers, state soybean board officials, shipping agents and traders arrived late last week to encourage local feedmillers, poultry and hog farmers to shift to US soybean meal (SBM) again. The US had previously dominated the Philippine market, supplying about 65% of the country's 1.5 million tonnes of SBM imports, but gradually lost its hold to cheaper SMB from Argentina. In 2009, the US accounted for only 26% (291,676 tonnes) of the Philippines SBM imports, while Argentina supplied about 771,137 tonnes (69%). Other sources of SBM for the Philippines are India and Brazil. 
 
 
 

[mikey]

Philippine feed wheat imports to reach 700,000 tonnes
[2 March 2010] The Philippines is expected to bring in some 700,000 tonnes of feed wheat imports for the first half of the year to offset any possible shortage in corn supply, said Agriculture Assistant Secretary Salvador Salacup. He said that 300,000 tonnes have already been brought in by feedmillers and livestock and poultry producers who are anticipating the adverse effects of the current drought on corn production. Some industry players think the amount of imported feed wheat might be even be greater if there is a shortage in corn production which will likely pull the price of yellow corn up. Earlier this year, some traders said that despite the 7% duty on feed wheat, landed cost of the grains remains on par with the price of yellow corn. For now, local corn industry players are mum on the imports, with some saying that the amount is so far acceptable as this will simply fill any possible shortage.

[mikey]

Areas planted to BT corn expand
[3 March 2010] Areas planted to the genetically modified (GM) BT corn in the Philippines expanded by some 14% to 400,000 hectares in 2009, a report by the International Service for the Acquisition of Agribiotech Applications (ISAAA) said. The group said the developing countries continued to increase their share of global biotech crop to almost 50% last year, with the Philippines being one of the top five countries exhibiting a growth in biotech crop area of at least 10%. The cultivation of GM crops have come under fire from various environment and food safety groups who question the safety of these products. Nevertheless, more and more GM crops are being produced globally, most especially in developing countries, where the biotech crop area last grew by 13% or seven million hectares as compared to industrialised nations where the growth was at 3% or two million hectares.

[mikey]

Areas planted to BT corn expand
[3 March 2010] Areas planted to the genetically modified (GM) BT corn in the Philippines expanded by some 14% to 400,000 hectares in 2009, a report by the International Service for the Acquisition of Agribiotech Applications (ISAAA) said. The group said the developing countries continued to increase their share of global biotech crop to almost 50% last year, with the Philippines being one of the top five countries exhibiting a growth in biotech crop area of at least 10%. The cultivation of GM crops have come under fire from various environment and food safety groups who question the safety of these products. Nevertheless, more and more GM crops are being produced globally, most especially in developing countries, where the biotech crop area last grew by 13% or seven million hectares as compared to industrialised nations where the growth was at 3% or two million hectares.

[mikey]

Weekly Outlook: Value of US Dollar and Corn Prices
US - It has not been uncommon for daily fluctuations in corn prices to be attributed to fluctuations in the value of the U.S. dollar relative to other currencies. So, what is the connection?, asks Darrel Good, agricultural economist at the University of Illinois.



From the side of the importer of US corn, a lower valued dollar in relation to the currency of that country, all else equal, is in effect a reduction in the price of corn. A lower price to the importer might be expected to result in larger imports. That is, there would be a movement down the demand curve to a new, larger equilibrium of quantity supplied and quantity demanded. For the US market, larger exports at the same nominal price of corn is in effect an increase in demand. That is, there is an upward shift in the demand curve for US corn. In turn, the increase in demand results in a higher equilibrium price of corn. Theoretically, then, a lower valued US dollar should result in larger exports and a higher nominal price in the US, assuming no change in other price factors.

The relationship between the value of the US dollar and the volume of US corn exports during the 12 month marketing year is difficult to identify. For the 10 marketing years from 1999-2000 through 2008-2009, for example, we find a very low correlation between the two variables. However, that is not the proper relationship to examine because it violates the assumption of all other things equal. A proper analysis should try to isolate the impact of the value of the dollar from the impact of other factors.

One of the things revealed in historic corn export data is that exports to the largest importer, Japan, are remarkably constant from year to year. For the period 1999-00 through 2008-09, Japan accounted for 26 to 36 per cent of annual US corn exports. Japan's imports of US corn were in a narrow range of 567 to 628 million bushels. It is generally well known that Japan buys US corn based on the need to support the domestic livestock industry and that imports are not sensitive to price or exchange rates. The data over the 10 year period supports that observation.

Examining the relationship between exports of US corn to destinations other than Japan and the value of the dollar reveals a negative correlation of about 0.4. The direction of the relationship is as expected and is relatively strong, but that simple relationship ignores the impact of other factors that might influence exports of US corn. Those factors might include such things as the price of corn and the magnitude of grain production outside the US Adding those factors to the analysis fails to yield a strong relationship between exports and the value of the US dollar.

The analysis presented here of the relationship between corn exports and the value of the dollar is not comprehensive and covers a very short period of time. Still, the results suggest that exports of US corn in any given year may not be especially sensitive to the value of the US dollar. In fact, the magnitude of corn exports in a given year does not appear to be highly correlated to other factors such as foreign grain production. The inability to quantify these relationships makes it difficult to forecast corn exports.

A second point about the effect of the value of the dollar on corn prices is that the export market is now a relatively small portion of the US corn market. Exports this year, for example, are expected to account for only 15 per cent of the total consumption of US corn. Exports to destinations other than Japan may account for only 10 to 11 per cent of total consumption. Even if the influence of the dollar's value on exports is stronger than suggested here, the impact on the price of corn is likely relatively small.

It appears that the impact of the value of the US dollar on the value of corn may be less than implied by daily market commentary. The direct cause and effect relationship is relatively weak. There may be some recent economic relationship between the value of the US dollar and crude oil prices which impacts the value of ethanol and therefore corn. The value of the US dollar and commodity prices may also be correlated to some degree in the current economic environment as expectations about world economies influence both the value of the dollar and decisions about investment in commodities in general. In any case, it is unlikely that the corn market will completely ignore currency values in the price discovery process, even if the relationship is weak.


 

[mikey]

PSA: Poor Harvest Year May Have Altered Corn Quality
US - Last year produced a bumper corn crop, but wet conditions during part of the growing season and harvest may have impacted its overall nutritional value, according to the Poultry Science Association (PSA).



In addition, nutritionists who rely on bushel weight as a prime factor for assessing quality may be missing an important part of the quality-evaluation picture, said PSA.

"Adverse growing conditions and the potential for reduced bushel weight are one component of the corn quality equation. Unfortunately, determining a precise relationship between variability in bushel weight and the nutritional value of corn is problematic," said Dr Mike Lilburn, a poultry nutritionist in The Ohio State University's Department of Animal Sciences.

In a given harvest year, the presence of poor growing conditions is often reflected in variations in the bushel weight or test weight of corn. A common measure used for pricing purposes, bushel weight represents a composite of factors affecting bulk density and assumed quality of the grain. The standard bushel weight for No. 2 Yellow corn is 56 pounds per bushel, but for years like 2009, with significant variability in the growing season, much of the corn coming out of the field may be well below this industry standard. Drying the corn, a process which takes place after harvest, can increase bushel weight, but the drying process may have other effects on the overall feeding value of the crop.

According to Dr Lilburn, nutritionists have long been aware of the variability in commodity grains and use routine analytical testing (moisture, fat, protein, etc.) to adjust their nutrient matrix values accordingly. These analytical tests, however, do not reflect what nutritional value the animal actually derives from a particular ingredient. This is particularly the case, says Dr Lilburn, for the energy content of grains, like corn.

Impact of Drying Temperatures
Corn harvested with above average moisture content may require more extensive drying prior to storage. According to Dr Lilburn, the drying conditions, particularly the drying temperature, may contribute to quality issues.

Dr Lilburn cited a 1975 study (Peplinski et al, Cereal Foods World) showing that widely different drying temperatures had little impact on the chemical composition of corn samples but did have considerable impact on many of the physical characteristics of interest to corn end users, such as bushel weight, kernel damage, kernel breakage, stress crack formation, etc. The study concluded that optimal harvest moisture should be ≤ 25 per cent with drying temperatures less than 180 F (82°) to minimize this type of physical damage to the grain.

High drying temperatures may also cause nutritional damage to corn. Peplinski et al. (1994) took corn samples from 30 per cent to 12 per cent moisture using temperatures ranging from 25° to 100°C. At the lower temperature, the drying took 38 hours while at 100°C, it only took one hour. Dr Lilburn cited a 2009 study by Malumba et al. (J. Food Engineering) which reported that the extractability of individual proteins from corn was greatly reduced for corn dried at 80°C and higher, indicating a potential decline in the nutritional value of the grain even though its gross chemical composition remained unchanged.

"Buyers should be on the lookout for corn coming in with moisture levels lower than they typically see, as this may be an indication that corn was dried down quickly at higher than normal temperatures," said Dr Lilburn.

The possible need of the corn producer to quickly dry his or her crop will be controlled by yield and weather conditions at harvest, but there may be an inherent tradeoff with the final quality of the grain. Drying conditions are something that buyers should be aware of and take into account whenever possible.

[mikey]

Weekly Outlook: Month-end USDA Reports
US - The USDA will release two reports on 31 March that could have significance for corn and soybean prices, writes Darrel Good, agricultural economist at the University of Illinois.



These are the 1 March Grain Stocks report and the annual Prospective Plantings report.

The quarterly stocks report for corn may be more important this year than in a typical year. There are still unresolved questions about the size of the 2009 harvest and the impact that quality of the 2009 crop has had on domestic consumption. Some argue that the generally low test weight of the 2009 crop has resulted in higher consumption rates in both the livestock and processing sectors. Lower test weights should result in larger rates of consumption if consumption were measured by volume. However, production and consumption estimates are made in units of weight so that the impact of test weight on the number of bushels consumed may be minimal. The stocks report may shed some light on this issue.

Anticipating the estimate of 1 March inventories of corn is also complicated by the seasonal pattern of domestic feed and residual use of corn during the past two marketing years. For the five years from 2002-03 through 2006-07, feed and residual use of corn during the first half of the marketing year ranged from 61.6 to 66.3 per cent of the marketing year total. The average was 63.8 per cent. First half use was 70.2 per cent of the marketing year total in 2007-08 and 68.1 per cent in 2008-09. What is the pattern this year? Assuming the pattern is the same as last year and that the USDA projection of 5.55 billion bushels for the year is correct, use during the second quarter should have been near 1.69 billion bushels. In contrast, a reversion to the 2002-03 through 2006-07 pattern would result in second quarter use of only 1.45 billion bushels, a difference of 240 million bushels.

If the seasonal pattern of domestic corn processing is following that of last year and the USDA projection of 5.565 billion bushels for the year is correct, use during the second quarter of the year should have been near 1.332 billion bushels. The combination of USDA and Census Bureau export estimates to date suggest that second quarter exports were near 422 million bushels. Using the higher estimate of feed and residual use, total use during the quarter should have been near 3.444 billion bushels. In that case, 1 March stocks would have been near 7.475 billion bushels, 520 million larger than the inventory a year earlier.

For soybeans, exports during the second quarter of the 2009-10 marketing year were likely near 618 million bushels. The Census Bureau has estimated the domestic crush for December 2009 and January 2010. Based on a guess of the February crush, the total for the quarter was near 485 million bushels. Seed, feed, and residual use of soybeans is the smallest category of use, but the quarterly pattern is somewhat unpredictable. For the five years from 2004-5 through 2008-09, use in that category during the first half of the year ranged from 124.4 to 193.1 million bushels. The average was 164 million. Use during the first quarter of the 2009-10 marketing year was estimated at 186.4 million bushels. Unless the 2009 crop was overestimated, use during the second quarter should have been small. If use was near 20 million bushels, total consumption of soybeans during the quarter is estimated at 1.123 billion bushels. Stocks on 1 March, then, should have been near 1.217 billion bushels, about 85 million less than stocks of a year ago.

A lot has been written about planting intentions of various spring planted crops in 2010. Expectations for corn and soybean acreage intentions are in a wide range. There is more uncertainty than usual about prospective plantings of spring crops because of the large decline in winter wheat seedings, the maturity of some CRP contracts, the wide range in total planted acres of all crops in recent years, and the lack of fall field work and fertilizer application in some areas. There seems to be general agreement that producers will report intentions to plant more corn due to expanding ethanol requirements. Expectations generally fall in a range of a two to four million acre increase. Expectations for soybean acreage are more diverse, with some expecting intentions to show an increase and some expecting a decrease. A large increase would likely be viewed as negative for prices due to the large South American crop and prospects for declining demand for US soybeans.


 

[mikey]

, April 01, 2010Print This Page
Higher Corn, Soybean Acreage Means Lower Prices
INDIANA, US - American agriculture's brief wheat revival appears to be over. Farmers in 2010 are expected to practice the old-fashioned religion of corn and soybeans, said a Purdue University agricultural economist.

Purdue News
 

Chris Hurt said Wednesday's (31 March) US Department of Agriculture Prospective Plantings Report portends larger stocks of corn and soybeans. He expects prices for the two commodities to fall, leaving farmers with tighter profit margins.

"There really is nothing in this report that would make us more bullish in terms of corn and soybeans," Professor Hurt said. "This has a tone that would suggest weaker prices until we can perhaps see lower prices begin to stimulate usage in the United States and around the world.

"That stimulation of usage would take some time. We'd have to rebuild livestock numbers. Most of the livestock industry is just beginning to get back to making some money, and it is going to be very hesitant to expand."

How low could corn and soybean prices go?

"Corn could well be in the lower $3 per bushel range," Professor Hurt said. "Soybeans certainly could drop back below the $9 per bushel mark, as we think about new crop beans especially. This begins to squeeze - given relatively high production costs - the margins for producers.

"We're reverting now a little bit back to the norm in US agriculture. And the norm in US agriculture has been we have more ability to produce than we have the ability to consume."

The USDA report, issued annually and based on farmer surveys, projected a 3 per cent increase in corn acreage and a slight increase in soybean planted acreage from 2009 across the United States this spring.

Farmers told the USDA they expect to plant 88.8 million acres of corn. National soybean acreage is projected at just over 78 million acres, a less than 1 per cent increase from this past year, but an all-time US high. In comparison, US farmers intend to produce 5.3 million fewer acres of wheat.

Indiana farmers say they intend to plant 5.7 million acres of corn and 5.5 million acres of soybeans this spring, up 100,000 acres and 50,000 acres, respectively. Farmers in Illinois expect to plant 12.6 million acres of corn (up 600,000 acres) and 9.5 million acres of soybeans (up 100,000 acres), while Ohio growers intend to plant 3.7 million acres of corn (up 350,000 acres) and 4.6 million acres of soybeans (up 50,000 acres).

Those additional corn and soybean acres are coming mostly from wheat, Professor Hurt said.

"The big decline in wheat acreage is really coming from the fall-seeded crops," he said. "Two things are going on there. One was very low returns and poor prices for wheat prospects and, secondly, extremely wet weather for the harvest season in 2009. We just didn't get the wheat in the ground.

"In Indiana we saw wheat acreage at the lowest level in recorded history - just 300,000 acres. That gave rise, then, to the ability to plant more corn and soybeans. We see a very similar pattern in neighboring states."

Just two years ago, wheat acreage was on the rise. Indiana farmers that year planted around 600,000 acres.

If the USDA report is accurate, farmers should return to average income levels, Professor Hurt said.

"If we go back and look at the last five years, we really see two good crop years in terms of income - 2007 and 2008. The 2009 crop ended up being a very high-cost crop, and most producers didn't really have strong recovery in terms of their costs. And now 2010 shapes up kind of the same way. We are going to see, maybe not a struggle, but tight margins. This is what most producers in agriculture in Indiana and around the country face most years."

[mikey]

Corn progress remains ahead of schedule
[10 May 2010] At the end of last week, US corn planting was 68% complete, compared to the 2005–2009 average of 40% as the weather has been better for planting this year than last. Corn emergence is also ahead of pace at 19%, compared with the 2005–2009 average of 9%. If the overall progress of the corn crop stays ahead of the past two years, when weather disruptions slowed progress significantly, the corn harvest and the resulting transportation demand could be 2–4 weeks earlier than in 2008 or 2009.