Corn & Seed/Oil Commodities

[mikey]

[18 August 2009] Philippine corn farmers have complained that the Department of Agriculture (DA) has not made good on its promise to buy more of its produce. The Philippine Maize Federation (Philmaize) said that the government had earlier assured corn farmers that it will buy some 300,000 tonnes of yellow corn at a support price of PHP 13 (USD 0.27)/kg through the National Food Authority. In a report in the BusinessMirror, DA Assistant Secretary Dennis Araullo disputed the claims, saying that the government is actually exploring the possibility of increasing their purchases. However, he also said that local corn farmers have not been complying with the 14% moisture content, thus they are unable to buy the corn.

[mikey]

Weekly Outlook: Corn, Soybean Production Forecasts
US - The USDA’s first forecasts of the season show potential for a 2009 US average corn yield of 159.5 bushels and a crop of 12.761 billion bushels. For soybeans, the US average yield forecast came in at 41.7 bushels, resulting in a production forecast of 3.199 billion bushels, writes Darrel Good, Agricultural Economist at the University of Illinois.



The USDA’s corn yield forecast, based on a combination of producer surveys and objective yield data collected in 10 states, is 4.6 bushels above the trend yield for 2009 and only 0.4 bushels below the record yield of 2004. Based on the adage that large crops tend to get larger, there is some expectation that the yield forecast will increase in subsequent Crop Production reports. There is, in fact, evidence that large yield forecasts in August tend to be followed by larger forecasts in subsequent reports. The most comprehensive analysis of that pattern is provided by a study by Isengildina, Irwin, and Good published in 2006.

For the current year, there is mixed evidence of corn yield potential. Some severe hail damage in key Iowa growing areas and some very dry weather in other corn growing areas during the first half of August may have reduced yield potential. In addition, the USDA’s weekly report of crop conditions in the 18 largest corn growing states have shown some modest deterioration in overall crop condition ratings. The per centage of the crop rated good or excellent peaked at 72 per cent for the week ended 28 June. For the week ended 9 August, 68 per cent of the crop was rated in either good or excellent condition, only one per centage point higher than the rating of the 2008 crop a year ago.

We have estimated a model that explains US average yield based on trend (time), per cent of the crop planted after 20 May, and per cent of the crop rated good or excellent at the end of the season. That model explains 97 per cent of the variation in annual yield from 1986 through 2008. Based on August 9 crop condition ratings, that model projects a 2009 US average yield of 158.2 bushels. That projection should be used with caution because crop condition ratings will likely change and because there is some forecast error associated with the model.

We have also developed a crop weather model to explain and forecast state average corn yields in Illinois, Indiana, and Iowa. Average yield forecasts in those three states are used to forecast the US average yield. Based on trend yield, planting progress of the 2009 crop, preliminary weather data through July 2009 and the assumption of average August weather, that process results in a 2009 yield forecast of 165.3 bushels. Again, these results should be used with caution because of unknown weather for the rest of the year and because of the relatively large standard error of the model estimates. For a more complete explanation, see the recent report by Irwin, Good and Tannura.

At this juncture, slightly higher yield and production forecasts in September and/or October would not be a surprise. Larger crop forecasts would likely keep some pressure on corn prices into the harvest period. In addition, the USDA forecasts of 2009-10 marketing year consumption of US corn appear generous. Beyond harvest, corn prices will be influenced by the revealed rate of consumption and the extent of US and world economic recovery.

For soybeans, the USDA’s yield forecast is tied with the 2007 yield as the fourth largest. The forecast is 1.4 bushels below the record yield of 2005 and 0.5 bushels below trend value for 2009. The forecast should not be considered a large forecast. While early August weather has not been perfect, both the crop condition ratings of August 9 and our crop weather model assuming average August weather point to a higher average yield in 2009. Those models point to yield of 44.1 and 43.6 bushels, respectively. Those forecasts should be used with caution for the same reasons as identified for corn. For more details of these forecasts, see the recent report by Irwin, Good and Tannura.

In addition, the late maturing crop may be at more risk to late season weather events. The USDA reported only 55 per cent of the crop setting pods as of 9 August. That compares to the previous 5 year average for that date of 72 per cent, which includes the relatively small 57 per cent of a year ago.

Absent, an early end of the 2009 growing season, larger soybean yield and production forecasts in subsequent reports would not be a surprise. Additional price weakness into harvest would be expected under such a scenario.

[mikey]

[20 August 2009] The latest World Agricultural Supply and Demand Estimates of the US Department of Agriculture indicated that US corn production for 2009/10 to be 324.14 million tonnes, with the overall supplies to increase to 368.19 million tonnes, according to a weekly commodity report by Amit Sacdev, India Representative of the US Grains Council. He said corn use for feed  is expected at 134.62 million tonnes, while food, seed & industrial use is expected at 139.09 million tonnes. Corn use for ethanol is expected at 110.21 million tonnes. Ending US corn stocks are expected at 41.19 million tonnes, up from July estimates of 39.37 million tonnes

[mikey]

[28 August 2009] The Philippine Department of Agriculture, through the National Food Authority (NFA), will sell yellow corn to Vietnam this year. NFA Administrator Jessup Navarro said that the Philippines is ready to import 50,000-10,000 tonnes of corn from Isabela, Pangasinan, Mindoro and Bukidnon provinces. Businessworld reported that the Vietnam Food Association said on Friday that the country would buy as much as 500,000-800,000 tonnes of corn from the Philippines. Meanwhile, DA Secretary Arthur Yap said that the agency has already reached an agreement with local corn farmers for the purchase of corn at PHP 10 (USD 0.21)/kg, saying that the NFA will double its procurement target to 600,000 tonnes to meet the export demand. Corn harvest in the Philippines is expected to reach about 802,964 tonnes in the second half of 2009, up from 656,723 tonnes harvested during the same period last year.

[mikey]

Weekly Outlook: Price Pattern for Corn and Soybeans
US - With large US corn and soybean crops expected this year, the strength of demand and the resulting rate of consumption will be important for post-harvest price prospects, writes Darrel Good, Agricultural Economist at the University of Illinois.



Demand and consumption are not interchangeable terms. Consumption results from the size of the crop, the strength of demand, and the resulting price level. All else equal, larger supplies result in lower prices and a higher rate of consumption. Conversely, all else equal, an increase in demand results in higher prices while consumption may or may not increase depending on the available supply.

For both corn and soybeans, the export sector is one that can be monitored frequently prior to and during the marketing year. The USDA provides weekly estimates of export inspections and weekly reports of export sales. For the upcoming marketing year, the USDA currently projects US corn exports at 2.1 billion bushels. That projection is 337 million less than the record exports of the 2007-08 marketing year, but 250 million above the projection for the 2008-09 marketing year that ends on 31 August 2009. The USDA expects a year-over-year increase in corn exports due to smaller coarse grain crops outside of the US and larger imports by Mexico and Taiwan. Coarse grain production outside the US in 2009-10 is projected at 751.7 million tons, nearly 3 per cent smaller than production during the 2008-09 marketing year. Smaller crops are expected in Canada, the European Union, China, and Mexico. Production is expected to rebound in Argentina following the weather reduced harvest this year.

As of 20 August 2009, the USDA reported that 284 million bushels of US corn had been sold for export during the 2009-10 marketing year. A year ago, new crop sales on the same date stood at 344 million bushels. The difference in new crop sales so far this year is primarily to Japan. The USDA reports that only 19.5 million bushels of US corn have been sold to Japan for delivery in the upcoming marketing year. A year ago, new crop sales stood at 107 million bushels. Sales to all other destinations are slightly larger than those of a year earlier. A slower start to Japan’s buying program is not a concern. Japan is the largest and most consistent importer of US corn, but the timing of their purchases varies each year. To reach the USDA’s projection of 2009-10 marketing year exports, weekly sales to all destinations need to average about 34 million bushels per week over the next 12 months.

For soybeans, the USDA projects 2009-10 marketing year US exports at 1.265 billion bushels, equal to the record exports expected for the year ending on 31 August 2009. US exports are expected to be supported by increased world soybean consumption, smaller exports from Brazil, and larger imports by Southeast Asian countries. A rebound in soybean production in Argentina in 2010 would provide more competition for US soybeans during the last half of the marketing year.

As of August 20, 2009, the USDA reported that 477 million bushels of US soybeans had been sold for export during the upcoming marketing year. That compares to new crop sales of a year ago of 271 million bushels. The largest year-over-year increase in sales is to China. Those sales totaled 309 million bushels as of 20 August, 156 million larger than cumulative sales of a year ago. New crop export sales to China totaled 56 million bushels during the week ended August 20, 2009. Export sales to all destinations need to average about 15 million bushels per week over the next 12 months in order to reach the USDA projection. Because of the seasonal pattern of US sales and shipments, new sales over the next 5 months need to average about double that rate to be on track to reach the USDA projection. Export sales already total about 38 per cent of the USDA’s projection for the year. That is double the average per centage of the previous 5 years.

The rate of corn consumption in other categories, ethanol production and feed use, will be revealed less frequently and with more severe time lags. Monthly reports of ethanol production will indicate the rate of corn use in that category. Feed use will be revealed only in the quarterly USDA Grain Stocks reports. The first of those will not be released until the second week of January 2010. For soybeans, the domestic crush rate will be revealed in the monthly reports by the National Oilseed Processors Association and the Census Bureau.

It now appears that consumption of US corn and soybeans will be record large in the 2009-10 marketing year. The price that the users will be willing to pay for those crops will depend to a large degree on the extent of recovery in the US and world economies. If recovery does occur, a modest increase in prices would be expected following the harvest of large crops.

[mikey]

4 September 2009] Philippine corn farmers are looking to Monsanto Philippines Inc to come up with a genetically modified soybean suitable for tropical conditions to help stabilise supply. Philippine Maize Federation (Philmaize) Chairman emeritus Roderico Bioco said that there is a big market for soybean, being both a basic food and feed ingredient. Mr Bioco said they are asking Monsanto to develop a tropical variety and hope to sign a deal with the company late this year. Philmaize said that following the government's failure to help local corn farmers, many are already considering shifting to planting other crops, including soybeans. Philmaize President Roger Navarro said “soybean is far more practical and farmers will earn better by planting soybean instead of corn.” Furthermore, he said soybean can act like a natural fertiliser as it enriches the soil.

[mikey]

[7 September 2009] Philippine corn farmers are up in arms against the government's decision to reduce its buying price from PHP 13 (USD 0.27)/kg to PHP 10 (USD 0.20)/kg. Philippine Maize Federation President Roger Navarro said that the decision was made by the Department of Agriculture without consulting corn farmers. He said Mr Yap consulted only with corn farmers in Isabela province in August and then announced that the government will double its corn procurement target to 600,000 tonnes, but at the lower price. Mr Navarro said this price should only apply to Isabela farmers and not to corn farmers in the rest of the country. However, Mr Yap said that when the buying price was raised to PHP 13/kg last year, they also did not consult the farmers, but only took into consideration the high fertiliser prices. He said that private traders are currently buying corn at PHP 6-7.50 (USD 0.12-0.15)/kg, so at the current government support price of PHP 10/kg, the farmers are still making money.

[mikey]

8 September 2009] The Philippine Department of Agriculture is constructing a PHP 35 million (USD 714,700) corn centre in Zamboanga del Norte in Mindanao to help ensure the continuous supply of corn in the region even during the wet season. The new centre is targeted to begin operations before the end of 2009. It is the third corn centre in the Zamboanga peninsula, which already has another in Zamboanga del Norte and one in Zamboanga del Sur. The region has about 185,000 hectares of corn farms, with more than 200,000 hectares of potential areas for corn expansion.

[mikey]

11 September 2009] The tight supply of soybean in the world market is likely to remain at least until February 2010, said Mr Thomas Mielke, Executive Director of ISTA Mielke GmbH. Speaking at the 6th SE Asia US Agricultural Cooperators Conference in Cebu, Philippines organised by the American Soybean Association and the US Grains Council, Mr Mielke said that as of end-August, soybean stocks was down 13.5 million tonnes. While US soybean production is expected to improve in the current crop season, this will not be enough to compensate for the decline in soybean production of South America (Argentina, Brazil and Paraguay), which experienced its worst drought in 70 years. Soybean production in South America is expected to recover strongly to about 123 million tonnes early in 2010, but this will not be available until end-February 2010 onwards.

[mikey]

USDA Forecasts Second-Largest Corn Crop
US - The USDA's World Agricultural Supply and Demand Estimates (WASDE) predicts the second-largest corn crop, record yields and exports up by 100 million bushels.



In a press release from US Grains Council, Julius Schaaf, its at-large director, said he expects to harvest one of the best corn crops ever on his Randolph, Iowa, farm. Mr Schaaf is not alone. USDA's World Agricultural Supply and Demand Estimates (WASDE) released on Friday forecasts 13 billion bushels of corn, the second-largest crop in history, a record-setting yield and a 100 million bushel increase in exports.

"We produce more on fewer acres," said Mr Schaaf. "It is because we deploy sound science when making our planting decisions. Because of biotechnology we can meet all demands domestically and around the world."

US corn production is estimated 193 million bushels higher than last month's report. USDA reported the national average yield is projected at a record 161.9 bushels per acre. US corn exports for 2009/2010 are raised 100 million bushels due to higher projected imports for Canada and lower production in South America and China. Based on record July and August production of gasoline blends with ethanol, as reported by the Energy Information Agency, beginning stocks are lowered 25 million bushels reflecting higher anticipated corn use for ethanol in 2008/2009.

Sorghum production for 2009/2010 is forecast up nine million bushels and beginning stocks projected down 10 million bushels based on a 10 million bushel increase in 2008/2009 exports. Sorghum exports are projected to remain steady at 140 million bushels due to stable demand in Mexico. Barley 2009/2010 exports, although down from 2008/2009, remain firm from the last report at 15 million bushels.

USGC president and CEO, Ken Hobbie, said the United States is more than capable of supplying the necessary feed grains both domestically and abroad.

He said: "US agricultural production will become increasingly vital to feeding a hungry world as US export competitors' production drops due to poor weather conditions.

"We are proud of US farmers for once again stepping up to the challenge of producing more coarse grains to satisfy all demands."

[mikey]

Weekly Outlook: Corn and Soybean Supply Prospects
US - Corn and soybean prices will continue to be influenced by a wide range of factors. For the next few weeks, the prospective size of the US harvest will be one of the dominating price factors, writes Darrel Good, Agricultural Economist at the University of Illinois.



For corn, the USDA’s September forecast placed production potential at 12.955 billion bushels, 194 million larger than the August forecast. The larger forecast reflects a US yield forecast of 161.9 bushels, 2.4 bushels higher than the August forecast. Large increases in expected yields were registered for Illinois, Kentucky, Michigan, Missouri, and South Dakota. The US forecast yield is record large and expected production is only slightly smaller than the record crop of 2007.

In general, the market anticipates that the US average yield forecast will increase again in October, IF the majority of the crop escapes a killing frost before maturity. The western corn belt states may have the most potential for further yield increases. There is less consensus about the potential change in the corn production forecast in October. That report will incorporate “administrative” acreage information, mostly certified acreage data from the Farm Service Agency. Some believe that, like last year, the estimate of planted and harvested acreage will be reduced next month due to the late, wet spring in the eastern corn belt.

While the corn production forecast continues to increase, the USDA once again raised the forecast of expected consumption of US corn during the current marketing year. Feed and residual use is now projected at 5.35 billion bushels, 50 million larger than the September forecast and 100 million bushels larger than use projected for the 2008-09 marketing year. Projected use is well below the record of 6.157 billion bushels of five years ago, reflecting the impact of reduced livestock numbers and a sharp increase in feeding of distiller grain. The year over year increase in expected use is in the residual category, as handling losses increase with a larger crop. Still, another large increase in distiller’s grain production this year makes the forecast look generous.

US corn exports during the current marketing year are projected at 2.2 billion bushels, 100 million larger than projected last month and 350 million larger than exports for the year ended on August 31, 2009. The increase this month is based on prospects for a smaller crop and larger imports by Canada and a smaller crop and smaller exports by Argentina in 2010. The US share of world corn exports is expected to grow from 60 per cent last year to 65 per cent this year as corn production outside the US declines by about 3 per cent.

The larger production forecast was also partially offset by a 25 million bushels reduction in the expected size of September 1, 2009 stocks of old crop corn and by a 5 million bushel reduction in expected imports. Still, the larger crop is expected to result in lower prices than forecast last month. The midpoint of the USDA’s forecast of the 2009-10 average price received by producers is $3.35, $.15 lower than projected last month.

For soybeans, the US crop is now projected at a record 3.245 billion bushels, 46 million bushels larger than the August forecast. The US average yield is projected at 42.3 bushels, 0.6 bushels above the August forecast. Yield forecasts for the corn belt states were mostly unchanged from last month, with the exception of Indiana where a 2-bushel reduction was registered. Yield forecasts were increased for all of the plains states, Missouri, and several southeastern states. Another modest increase in the yield forecast is expected in October, but the production forecast will also be influenced by any changes in acreage estimates.

The USDA increased the forecast of consumption of US soybeans during the current marketing year by 36 million bushels. A larger crush is expected to result from larger soybean meal exports, which result from prospects of smaller exports from India. Larger soybean exports are expected to result from larger imports by China and from lower soybean prices. The midpoint of the USDA’s projection of the marketing year average price received by producers is $ 9.10, $.30 below the August projection.

In comparison to USDA’s farm price forecasts of $3.35 and $9.10 for corn and soybeans, respectively, the futures market currently points to an average price of about $3.00 for corn and $8.85 for soybeans.

[mikey]

17 September 2009] The Philippine Department of Agriculture (DA) will double its corn procurement volume from 300,000 tonnes to 600,000 tonnes to help local corn farmers. DA Secretary Arthur Yap said that the government will buy half the volume at PHP 10 (USD 0.21)/kg and the other half at PHP 12.50 (USD 0.26)/kg to help support local prices and protect farmers' income. Figures from the Bureau of Agricultural Statistics show that in the first week of September, traders and private buyers of local corn were paying farmers PHP 8.58/kg (USD 0.18), down from PHP 10.44/kg (USD 0.22) earlier this year. The current market price falls below the production cost of PHP 9.50/kg (USD 0.20). In August, the Philippine Maize Federation called on the government to increase its buying price to encourage local farmers to plant corn.

[mikey]

18 September 2009] The Philippine Department of Agriculture said that local corn production is expected to go up by 6% in 2010 to 7.51 million tonnes as it will be boosted by demand from the hog and poultry sectors. Agriculture Assistant Secretary Dennis Araullo, who also heads the government's corn program, said that election spending next year will increase the Filipinos' purchasing power and drive up demand for chicken and pork meat, which will spur growth in the poultry and hog industries. However, corn industry officials have raised doubts about achieving this target, saying the current low prices of corn in the local market might discourage farmers from planting corn.

[mikey]

Weekly Outlook: Early Corn and Soybean Exports
US - The USDA has projected that corn exports will rebound sharply during the current marketing year, writes Darrel Good, Extension Economist at the University of Illinois.



Exports of US soybeans are expected to be maintained at the record level of the 2008-09 marketing year.

Corn exports during the 2009-10 marketing year are projected at 2.2 billion bushels, 237 million below the record exports during the 2007-08 marketing year, but 350 million above exports during the 2008-09 marketing year. The US share of the world corn export market is expected to increase from 60 per cent last year to 65 per cent this year. A larger US share of the world export market reflects prospects for smaller crops in the exporting countries of Canada, South Africa, and China. In addition, total world trade of corn is expected to grow by about 275 million bushels (nearly 9 per cent) due to smaller crops in Europe and Mexico and growing consumption in China.

Soybean exports during the current marketing year are projected at 1.28 billion bushels, equal to exports during the 2008-09 marketing year. The US share of the world soybean export market is projected at 45 per cent, about equal to that of last year as world soybean trade is expected to increase by only 25 million bushels (about 0.9 per cent). Larger imports by Japan and Mexico are expected to be offset by smaller imports by Western Europe and China.

One of the major factors that will influence export demand for US soybeans during the last half of the 2009-10 marketing is the size of production in Argentina and Brazil. Production in Argentina in 2009 was down 31 per cent from production in 2008 due to dry weather conditions. Production in Brazil dropped about 7 per cent. As a result of smaller production, Argentine exports dropped from about 510 million bushels to about 220 million bushels. Soybean exports from Brazil, however, increased from about 930 million bushels in 2007-08 to about 1.08 billion in 2009-10. Inventories were reduced sharply in both countries.

For the 2010 harvest, the USDA has projected a 2 million acre increase in soybean plantings in Brazil and a 5 million acre increase in Argentina. A return to more normal yields would result in production increases totaling about 700 million bushels in Argentina and 185 million bushels in Brazil. The USDA expects Argentine exports to increase by 140 million bushels and Brazilian reports to decline by 180 million bushels during the 2009-10 marketing year. Prospective supplies would allow for larger exports from both countries than is currently projected. Decisions by importers on sourcing soybeans will be important in determining if US exports remain record large.

The USDA weekly reports of export inspections and export sales provide the information to monitor the pace of export activity relative to projected exports for the year. Corn export inspection through the first 4.5 weeks of the marketing year were reported at 182 million bushels about 16 million above the total of a year ago. Inspections need to average about 42 million bushels per week to reach the USDA projection for the year. As of September 24, 2009, the USDA reported that 466 million bushels of US corn had been sold for export, but not yet shipped. That exceeds outstanding sales of a year ago by about 60 million bushels. The early pace of US corn activity is encouraging, but will need to accelerate to stay on track with the USDA projection for the year.

US soybean export inspections during the first 4.5 weeks of the marketing year were reported at 39 million bushels, about equal to that of a year ago. Shipments are typically small during the first 5 or 6 weeks of the marketing year as South American exports dominate. As of 24 September 2009 the USDA reported that 714 million bushels of US soybeans had been sold for export, but not yet shipped. That total is nearly double the total on the same date last year. The large increase in outstanding sales is to China (up 120 per cent) and unknown destinations (up 290 per cent). China has purchased 450 million bushels of US soybeans for import during the current marketing year, accounting for 61 per cent of all US export sales. As a result, sales of US soybeans have reached nearly 60 per cent of the USDA’s projected exports for the year. The current pace of export sales cannot be maintained, but the large sales to date suggest that the USDA’s projection will be reached, if not exceeded.

While early export prospects for corn and soybeans are encouraging, the size of the US corn and soybean crops will dominate prices for the next several weeks. The USDA will update production forecasts on 9 October.

[mikey]

, October 12, 2009Print This Page
CME: Larger-than-Expected Corn Production Indicated
US - USDA’s monthly Crop Production report and World Agricultural Supply and Demand Estimates, released on Friday, indicated larger- than-expected corn production and smaller-than-expected soybean output this fall, write Steve Meyer and Len Steiner.



The soybean numbers were farther from average prereport estimates and drove CME Group Soybean futures 22 to 28 cents/bushel higher for the 2009-2010 crop year. Soybean meal futures also rose by $5 to $7.60/ton while soybean oil futures gained $0.61 to $0.64 per cwt.

USDA lowered 2009 ending corn stocks to 1.674 billion bushels to reflect last week’s Grain Stocks report. It also lowered its estimates of both planted and harvested acres for corn from September levels. Both are still larger than in 2008. USDA’s projected average yield of 164.9 bu./acre was over 2 bushels higher than the average pre-report estimate (162.7) and represents a new record corn yield. The higher yield more than offsets lower harvested acres to give an estimated corn crop of 13.018 billion bushels, again a record. Feed and residual usage was increased by 50 million bushels while exports were decreased by the same amount. Other minor changes left projected total usage at 13.03 billion bushels — another record. Still, the projected 2010 year-end stocks-to-use ratio is over 1 per cent lower than this year’s level. USDA’s forecasted range for the national weighted average farm price of corn did not change from the September report. The mid-point of that range, $3.35/bushel is 18 per cent lower than last year’s projected average price, reflecting lower corn demand primarily driven by lower oil and ethanol prices.


USDA’s projected year-end stocks of soybeans, increased to 138 million bushels to reflect the Grain Stock report, leave us economists encouraged. They indicate that prices indeed do ration scarce supplies! Tight projected year-end stocks have kept beans and bean product prices high all summer and they apparently worked. Isn’t it great when reality aggress with theory!

The soybean forecasts were definitely closer to the low end of pre-report estimates even though USDA’s predicted yield of 42.4 bushels per acre would be the second largest ever and the projected crop of 3.25 billion bushels will be the largest ever. Higher crushings and exports both use a portion of that larger crop but 2010 year-end stocks are now forecast to be 230 million bushels, two-thirds larger than this year and representing 7.3 per cent of projected usage.