Tuesday, March 15, 2011Print This Page
Corn and Soybean Prices – Mission Accomplished?
US - In our newsletter of 18 January, it was suggested that corn and soybean prices had the dual objectives of allocating old crop supplies so as to maintain pipeline supplies at the end of the year and directing spring planting decisions writes Darrel Good, Agricultural Economist at the University of Illinois.


Specifically, prices needed to ensure an increase in corn acreage and to maintain soybean acreage at the 2010 level.

For soybeans, the declining pace of both the domestic crush and exports, along with the prospects for a large increase in double-cropped acreage in 2011, suggested that soybean prices had increased enough by mid-January to accomplish the dual price objectives. That conclusion was reinforced by the improving condition of the Brazilian soybean crop and prospects for a record harvest in 2011. The USDA confirmed prospects for a record large Brazilian soybean crop last week. Soybean prices increased another $.40 from 18 January to the peak on 9 February. Since then, May 2011 soybean futures have declined about $1.30. The decline in November 2011 futures has been only slightly less.

For corn, the conclusion in mid-January was that prices would need to remain very strong to slow the pace of consumption and to motivate a large increase in planted acreage. May 2011 corn futures increased nearly $.60 from January 18 to the peak on 4 March. December 2011 futures increased about $.40 to the much earlier peak on 11 February. Corn prices have declined sharply since early March and are now back to the level of mid-January. The rapid decline suggests the market believes that corn prices have accomplished their objectives. The likelihood that old crop consumption has been slowed enough comes from two perspectives. First is the macro-perspective. Recent world events are seen as a threat to the fragile economic recovery that is underway. Political unrest in North Africa and the Middle East has pushed crude oil and gasoline prices nearly 15 per cent higher in the past month. Those higher prices could slow economic growth and curb commodity demand, including demand for agricultural commodities. Now, the devastating earthquake and tsunami in Japan may challenge the Japanese and world economies, pointing to the possibility of a further slowdown in global demand growth.

The second perspective of corn demand comes from the flow of information relative to the pace of consumption. During the first half of the 2010-11 marketing year, ethanol production, and presumably the amount of corn used for ethanol production, was 15 per cent larger than during the same period last year. Last year, however, ethanol production was relatively small during the first half of the corn marketing year and accelerated rapidly in the last half of the year. Year-over-year increases in ethanol production will be much smaller for the last half of the 2010-11 marketing year. Still, use during that period needs to be only 2.3 per cent larger than use of a year ago to reach the USDA projection of 4.95 billion bushels of corn used for ethanol production.

The pace of corn exports has also been slow enough that the USDA projection of marketing year exports of 1.95 billion bushels is not expected to be exceeded. While the pace of corn export sales accelerated during the 5 weeks ended 24 February, the pace of shipments remains generally slow. Cumulative marketing year export inspections through March 10 were about 10 million bushels less than the total of a year ago. In addition, Census Bureau estimates of corn exports through January were only 26 million bushels larger than cumulative inspections. Last year, Census estimates through January exceeded inspections by 63 million bushels. Like last year, exports will have to increase rapidly in the last half of the year in order to reach the USDA projection for the year. That pace may now be threatened by the situation in Japan, although not much is known about damage to total port capacity, transportation infrastructure, or the livestock industry. Japan is the largest importer of US corn and as of 3 March, 116 million bushels of corn sales to Japan had not been shipped.

Finally, corn prices have been pushed lower by ideas that producers have already made plans for a large increase in corn acreage in 2011. Some are projecting planted acreage above the USDA expectation of 92 million acres and even above our calculation of a needed 93 million acres. These expectations of large corn acreage underscore the importance of the USDA’s 31 March Prospective Plantings report.

Wednesday, March 23, 2011
Global Wheat Production to Increase in 2011
GLOBAL - FAO's first forecast for world wheat production in 2011 stands at 676 million tonnes, representing a growth of 3.4 percent from 2010, the March 2011 edition of the Crop Prospects and Food Situation report said today.
 

This level would still be below the bumper harvests in 2008 and 2009.

Wheat plantings in many countries have increased or are expected to increase this year in response to strong prices, while yield recoveries are forecast in areas that were affected by drought in 2010, the Russian Federation in particular, the report specified.

As the bulk of the world's coarse grains and paddy crops are yet to be planted, it is, however, too early to forecast total cereal production for this year.

Food deficit countries importing less, paying more
Looking back to last year's production, the FAO report notes that in the low-income food-deficit countries (LIFDCs) as a group, the 2010 cereal output rose by 5.6 percent, a development that will result in reduced cereal imports in the 2010/11marketing years.

But this will not necessarily spell much relief for these countries as their overall cereal import bill is estimated to increase by 20 percent because of higher international prices.

Africa - a mixed picture
Prospects for the 2011 May-June harvests of winter wheat and coarse grains in North Africa are generally favourable, except in Tunisia where dry conditions in January dampened hopes for a robust wheat production recovery. The current situation in North Africa has resulted in the displacement of large numbers of people and disruption to the flow of goods and services in this heavily cereal-import dependent region.

In Southern Africa, the outlook for the main 2011 maize crop is favourable and relatively low prices have helped stabilize food security. A record crop of maize is forecast in Malawi and Zambia. However, in South Africa, the largest producer in the subregion, a sharp drop in production is forecast from last year due to reduced plantings in response to high level of stocks and low prices for maize at planting time.

In Eastern Africa, despite bumper harvests in 2010 and generally low prices, food insecurity has increased in the drought-stricken pastoral areas. In Western Africa, post-election violence in Cote d'Ivoire continued to damage general economic conditions in the subregion and, in particular, trade.

Asia and South America
In Asia, good 2011 wheat harvests are forecast in India and Pakistan. In China, the drought situation in the North Plain has been eased by recent precipitation but the outlook for the wheat crop still remains uncertain.

In the Asia CIS subregion, where Kazakhstan is the major producer, the bulk of the crop is yet to be sown but in view of current strong prices plantings are expected to be in line with the relatively high level of the past two years. Assuming a recovery in yields after last year's drought-reduced level, a significant increase in production could be achieved.

In South America, however, where the season is well advanced, prospects for the 2011 maize crop are unfavourable in Argentina and Uruguay due to persistent dry weather linked to the La Niña weather event. In Brazil, by contrast, the outlook is positive after good rainfall since planting improved soil moisture conditions for developing crops.

Food assistance required in 29 countries
The need for food assistance, nevertheless, persists in many areas, the bulletin reported, with 29 countries currently requiring external assistance for food. Of these, 21 countries are in Africa and seven in Asia, including the Democratic People's Republic of Korea. The displacement of large numbers of people in North Africa because of recent political events in that region also has made emergency assistance necessary.

Monday, March 28, 2011
An Eye on Recovery Efforts and Feed Grain Trade
JAPAN - The US Grains Council reports the Japanese industry has been making significant strides to regain its normal feed mill production capacity within the next few months.


“Assuming significant escalation of the nuclear power plant issues will not arise and in spite of the horrendous losses suffered in Japan, the Council believes the consumer demand in Japan will remain strong and will drive continued imports of US coarse grains,” said Tommy Hamamoto, USGC director in Japan. “In the short-term, logistical issues will continue to be a problem, but the Japanese feed industry is working hard to recover from the damage. By April or May, the Council is hopeful Japan will recover and return to a somewhat normalcy.”

As previously reported by the Council, four of Japan’s major importing facilities and attached feed mills were severely damaged by the earthquake and subsequent tsunami that struck Japan on 11 March. These four facilities account for approximately 3.66 million metric tons of compound feed production per year – around 15 per cent of Japan’s total annual compound feed production of 25 million tons. Another mill, which accounts for an additional 15 per cent, suffered some damage but compound feed production has already partially resumed.

“Japan is prepared to cover the feed loss by facilities coming back online and increased production in unaffected mills. These [unaffected] mills are sending feed supplies in small vessels to affected areas,” Hamamoto said. “There are currently bottlenecks: the capacity of unaffected ports to unload redirected shipments and storage limitations; impeded passage of ships through channels caused by debris in shipping lanes; increased transportation costs, fuel supplies and shortage of trucks and ships; and power needed for production and processing. The Council hopes those serious bottlenecks will be short-term setbacks in the recovery efforts.”

The Council has heard reports of limited loss of animal herds or flocks.

“Since the majority of livestock and poultry farms are located near Japan’s mountain side (west side of Japan), minimal animal loss is expected from the tsunami. However, logistics of fuels, feed and products continue to be a problem for those farms,” said Hiroko Sakashita, USGC associate director in Japan, adding the Council anticipates knowing the total impact in a few weeks. “In addition, some animal production was affected as facilities had to be evacuated due to elevated radiation levels. This market may further be affected by negative perceptions and false information on their products.”

Exposure to radiation will remain a longer term concern. Japan’s Ministry of Agriculture Forestry and Fisheries released a notice alerting livestock farmers to be cautious and not to feed radioactive-material-contaminated hay, roughage, silage and water to livestock. It recommends that farmers keep their animals indoors if possible. According to Council sources, feed millers in Hokkaido, Chukyo, Kansai and Kyushu have been working around the clock to ensure that sufficient supply of animal feed is available in the damaged area.

“The Council is searching for the best opportunity to get involved with the relief efforts in Japan. Mostly what we hear is to wait, since much of the relief is being provided by the Japanese government,” Hamamoto said. “The Council will continue to monitor the recovery efforts and determine how to best utilize our resources and assets to help mitigate long term damage.”

Friday, April 01, 2011
High Commodity Prices Continue in Light of Report
US - High commodity prices appear to be here to stay indefinitely despite a US Department of Agriculture report issued yesterday that projects increased US corn acreage this year, said a Purdue University agricultural economist.
Purdue News
 

The Prospective Plantings report projects that corn farmers will plant more corn acres and fewer soybeans. Corinne Alexander said the report, coupled with lower-than-expected US grain inventories, offers little hope for relief from high commodity prices.

"US grain stocks, or inventories, are very tight, and whether that is because of lower production or higher use, we don't know yet," Professor Alexander said. "What we do know is that we need to have at least an average crop production year in 2011 to keep up with the current rate of use."

Professor Alexander and Chris Hurt, another Purdue agricultural economist, will present a free live webinar from 7-8:30 p.m. EDT Thursday (31 March) to update US farmers on the report – what it means for US and world grain markets and likely effects on prices. They also will offer strategies for pricing crops and capturing revenue offered by the markets.

The report, issued annually and based on farmer surveys nationwide, projects a 5 per cent increase in corn acres, at 92.2 million acres, and a 1 per cent decrease in soybean acres, at 76.6 million acres.

At those projections, even with average yields commodity prices are unlikely to decrease because of the tight world grain inventories. Any price relief would have to come in the form of an above-average yield; even still, Professor Alexander said the price relief would be marginal.

If yields were abnormally poor, commodity prices would increase to the point of rationing use, she said.

"In the event of poor crop yields in 2011, prices would have to increase enough to reduce usage by 1 billion bushels for corn and 200 million bushels for soybeans," Professor Alexander said. "That would mean an average-crop-year corn price of $7.50 per bushel and $14.75 per bushel for soybeans."

Higher grain prices mean higher consumer food costs and high feed costs for livestock producers.

"Feed is the biggest cost for livestock producers," Professor Hurt said. "If grain prices continue upward, there could come a point when many livestock producers would start to liquidate."

With current market livestock prices, some producers can afford up to $8 per bushel on corn. Anything higher would be enough to drive many operations toward financial losses.

Although high grain prices initially seem to benefit growers, Alexander cautioned that prices high enough to induce rationing eventually could lead to lower demand and lower prices.

"If we end up in a rationing scenario, it could lead to demand destruction for grain producers," Professor Alexander said. "Herd liquidations could ultimately translate into lower crop demand in subsequent years, which could reduce grain prices."

Information for the Prospective Plantings report is gathered in early March, so Professor Hurt cautioned that in any given year the difference between what farmers tell the USDA they intend to plant and what they actually plant can shift.

"If we get into a situation where planting is delayed and farmers are unable to get corn planted early enough, many will switch those acres to soybeans," he said. "Some producers may also change their minds on what to plant based on what commodity markets are doing."

Twenty-four Purdue Extension County offices will serve as host sites for the webinar. To find a local host county, please click here and click the nearby counties on the Indiana map.

World Agricultural Production - March 2011
 

Brazil: Good Conditions for First-Crop Corn Boost Harvest Prospects
 Brazil corn production for 2010/11 is forecast at 53.0 million tons, up 2.0 million or 4 percent from last month, but down 3.1 million or 6 percent from last year. Harvested area is estimated at 12.90 million hectares, up 0.15 million or 1 percent from last month and down 0.03 million or 1 percent from last year. Yield is forecast at 4.11 tons per hectare, up 3 percent from last month but down 5 from last year.

Brazil has two corn crops. The first is a long-season crop that is planted in late September. The long-season crop is currently maturing and is in good condition. The second is the safrinha crop, which is grown mainly in the center-west region. Safrinha’s share of the country’s corn crop has increased significantly during the past five years, to nearly 40 percent of Brazil’s total corn output. Safrinha corn is planted immediately after the harvest of the early-maturing soybeans, but soybean harvest delays have resulted in a high occurrence of the safrinha corn being planted beyond the normal planting window, which typically ends in late February. Final yields for safrinha corn will depend largely on precipitation from March through early May.


Argentina: Estimated Record Yield for Wheat
The USDA forecasts Argentine wheat production for 2010/11 at 15.0 million tons, up 36 percent from last year. Area is estimated at 4.3 million hectares, up nearly 18 percent from last year. Yield is estimated at a record 3.49 tons per hectare, up 16 percent from last year and substantially higher than the five-year average of 2.58 tons per hectare.

Low soil moisture caused some concern at the onset of planting, but timely rains in early November allowed high prices to push more area into wheat than last year. Frequent rains throughout the season were beneficial and increased yields more than expected. Harvest is in progress.


Australia: Wheat Prospects Stable Despite Poor Crop Conditions in the West and Delayed Harvest in the East
Australia’s 2010/11 wheat harvest is complete, with the majority of the crop already delivered to bulk handlers. The USDA estimates production at 26.0 million tons, up 1.0 million or 4 percent from last month, and up 4.0 million or 19 percent from last year. Estimated output is the highest in 7 years. The area is estimated at 13.4 million hectares, down 5 percent from last year. The yield is forecast at 1.95 tons per hectare, 25 percent higher than last year.

The major wheat cropping areas in New South Wales, Queensland, Victoria and South Australia experienced overall excellent water availability and favorably cool weather throughout the growing season. Although excessive rainfall in eastern Australia from late November through early January resulted in harvest delays and a likely reduction in grain quality, the wheat crop along the east coast is reported to be the highest in many years. Western Australia experienced one of the worst seasons for wheat and other winter crops in over 40 years, with low soil moisture and above-average temperatures throughout the season for much of the west coast. Wheat output in Western Australia turned out to be better than previously projected. The yield gains in New South Wales, Queensland, Victoria, and South Australia offset the year-to-year decline in Western Australia.


Mexico: Cold Snap Destroys Winter Corn in Sinaloa
The USDA forecasts Mexican corn production for 2010/11 at 22.0 million tons, down 8 percent from last month but up 8 percent from last year. Area is estimated at 6.6 million hectares, down 5 percent from last month but up 5 percent from last year. A cold snap in early February that lasted nearly a week damaged winter corn in the state of Sinaloa, with temperatures plunging to minus 8 degree Celsius in some locations. On February 4, the coldest night, 14 of 32 temperature stations reported values of minus 1 degree or lower. Frost damage for corn occurs when the temperatures drop below -1 degree Celsius. Sinaloa plants approximately 1.3 million hectares of corn and produces roughly 4.5 million metric tons, or around 25 percent of Mexico’s total corn production. Industry sources estimate that 90 percent of Sinaloa’s corn crop – roughly 90,000 hectares – may have been damaged by the prolonged below-normal temperatures. Mexico produces two corn crops: spring/summer and fall/winter. The fall/winter crop accounts for 25 percent of the country’s total corn production, and 75 percent of the winter corn is produced in Sinaloa. The rest is grown in the Tamaulipas and Veracruz area. Sinaloa corn is sown in December and January and harvested in May/June, and nearly all is irrigated.

Brazil: Estimated Soybean Production Increased
Brazil soybean production for 2010/11 is estimated at 70.0 million tons, up 1.5 million or 2 percent from last month, and up 1.0 million or 1 percent from last year. Harvested area is estimated at 24.25 million hectares, unchanged from last month but up 0.75 million or 3 percent from last year. Yield is estimated at 2.89 tons per hectare, up 2 percent from last month but down 2 percent from last year. The soy crop is in good condition. Harvest is underway, with progress slightly behind average and yields reported as average to above average. Harvest delays are attributed to late planting (due to low soil moisture when farmers were ready to plant) and frequent rain during February. The wet weather has led to occurrences of fields being harvested with a high grain moisture content. Some soybean fields were “terminated” (treated with chemicals to enable farmers to begin harvesting soybeans that were not yet fully mature) so that they could begin planting the second (safrinha) cotton and corn crops. Now that the window to plant the safrinha crops has closed, the harvest of later-planted and longer-season soybeans will begin.

China Soybean Revisions for 2009/10 and 2010/11
China’s 2010/11 soybean production is estimated at 15.2 million tons, up 0.8 million or 6 percent from last month and 0.2 million or 1.5 percent from last year’s revised estimate. Area is estimated at 8.8 million hectares, up 5 percent from last month but down 4 percent from last year. Farmers planted less soybean acreage in 2010 because profits were higher for alternative crops such as rice and corn. The estimated yield of 1.73 tons per hectare is up 6 percent from the drought-impacted crop of 2009/10 and above the 5-year average. The weather in 2010 was generally favorable for soybean growth in Northeast China, where more than 50 percent of the crop is produced. The area and production estimates for 2009/10 were revised upward to 9.2 million hectares and 15.0 million tons based on official government statistics.

Australia: Record Cotton Crop Forecast
The USDA forecasts Australia’s 2010/11 cotton production at 4.5 million 480-pound bales, up 0.5 million or 13 percent from last month and 154 percent from last year. Harvested area is forecast at 0.6 million hectares, up 7 percent from last month, and up 0.4 million or 200 percent from last year. The yield is forecast at 1633 kg/ha, up 5 percent from last month but down 15 percent from last year.

Australia cotton is at advanced flowering to boll formation stages. The favorable planting conditions, combined with rising cotton prices, led to increased plantings of both irrigated and dryland cotton. Most cotton growing regions in New South Wales and Queensland experienced above-normal winter and spring rainfall resulting in excellent planting conditions in October and November. Irrigation water is plentiful, with improved on-farm reservoirs and water allocations up 100 percent.

From late November to early January, rainfall was excessive in some major cotton growing areas of central-south Queensland and northern New South Wales. This caused moderate to excessive flooding in some areas. Although the floods had devastating impact in certain areas, field observations made by crop-assessment specialists from the USDA Foreign Agricultural Service indicate that most cotton growing areas actually experienced limited flood damage and the majority of cropping areas are now benefiting from the improved soil moisture profiles and the abundant irrigation reserves. Prospects are high for both yields and total harvested areas and by all estimates the Australian cotton industry is on track for a record cotton harvest.


Brazil: Estimated Cotton Production Increased
Brazil cotton production for 2010/11 is estimated at 8.80 million bales, up 0.60 million bales or 7 percent from last month and up 3.35 million bales or 61 percent from last year. Harvested area is estimated at 1.30 million hectares, 7 percent from last month, and up 56 percent from last year. Yield is estimated at 1,474 kilograms per hectare, nearly unchanged from last month, but up 6 percent compared to last year.

The early-planted, long-season cotton crop is setting bolls and is in good condition. A reduction in the area sown to soybeans in the center-west region (due to wet planting weather) coupled with high cotton prices provided incentive for farmers to increase first-season cotton area. The second-season (safrinha) cotton crop is planted immediately after the harvest of the early maturing soy crop in mid-January, but weather-related harvest delays for soybeans in the centerwest region has resulted in late planting safrinha cotton. Final yields for safrinha cotton typically depend in large part on the amount of rainfall received before the dry season arrives in early May.


India's Cotton Production Revised Downward
India's 2010/11 cotton production is estimated at 25.0 million 480-pound bales, down 4 percent from last month, but up 2 million or 9 percent from last year. Area is estimated at 11 million hectares, a 7 percent upward change from last year. The yield is 495 kilograms per hectare, slightly up from last from last year.

The 2010 monsoon rainfall progressed well. In general, cumulative rainfall was very favorable compared to the previous year, promoting good crop development. According to the provisional planting estimates from the Ministry of Agriculture in India, cotton plantings in the major producing areas increased from last year. Encouraged by relatively favorable early-season rainfall, high domestic prices, and anticipated export demand, cotton growers in the States of Gujarat, Maharashtra and Madhya Pradesh significantly increased planted area compared to last year. As of December, the majority of the crop was in advanced maturity stages and rated in mostly fair to good condition. Harvest is underway and progressing well in most areas. Deliveries to ginning facilities are higher than last year in several states, including Punjab, Gujarat, and Madhya Pradesh, although recent market arrivals indicate a smaller crop than previously projected. This is due in large part to drier-than-normal weather toward the end of the season, especially in Gujarat. The poor late-season weather has resulted in declining yield prospects.

Monday, April 18, 2011
CME: Wheat Feeding, Impact on Corn Demand
US - The issue of wheat feeding and the potential impact on corn demand remains a hot topic in the marketplace and we received plenty of valuable input following our last report, write Steve Meyer and Len Steiner.


We thought we’d share some of that input and expand a bit on the issue.

Soft red winter wheat (SRW) planted acres are sharply higher. The attached chart gives you an idea of the spread of winter wheat. According to our calculations show total planted acres for 2011 at 7.948 million, 57 per cent higher than a year ago. Some other estimates we have seen are slightly different but we did a quick math of acres east of the Mississippi and this is likely close enough for this analysis. Total wheat acres in 2011 are 3.9 million acres higher and even though SRW accounts for just 19 per cent of acres planted with winter wheat, it will contribute about 74 per cent of the growth.

 

 
USDA noted in their latest WASDE report that “increased prospects for 2011 SRW wheat production and higher year-to-year corn plantings in the South reduce expected corn feed and residual disappearance during the second half of the 2010/11 corn marketing year.” The question everybody is asking is: Will hog and poultry producers replace high priced corn with wheat? There are logistical, economic and management considerations that will affect this decision.

Logistically, SRW wheat is relatively close to large poultry operations in the Southeast and transportation costs should not be significantly higher than for corn, indeed they may be lower in some cases. Also, there is SRW supply that could easily go into hog operations in the Southeast and even those in the Midwest. Basis (the difference between futures and local cash price) is an important consideration whenever doing a comparison of feed prices. Chicago futures may show one price level but that needs to be adjusted for the local price, which reflects availability, quality and transportation costs. In our view, the big issue with including wheat in a hog or poultry ration will be from a management perspective.

One of the downsides of having relatively low corn prices for the last three decades is that people get used to a set diet and there is relatively limited experience with other feeds, such as wheat. Can you feed wheat to pigs and broilers? Yes. We have seen some research which reference broiler diets with up to 80 per cent wheat1. Also, research has shown that “wheat can replace all the corn in diets fed to all categories of pigs.2” But, to include a new feed requires more than just replacing corn with wheat, it requires a change of the entire feeding regimen, the feed also needs to be handled differently and may require additional work. Finally, producers need to be sure how the feed change will affect meat attributes (fat color in broilers for instance).

Bottom line: We will likely see some wheat feeding, and those with experience will use more wheat than in other years but we think that this will not be as quick to implement as some may think and the eventual supply of wheat fed to hogs and poultry will likely be smaller than some expect.

Friday, April 22, 2011
China's Ag Sector Faces Rising Costs in 2011
CHINA - China's agriculture sector is expected to face increasing pressures from rising costs in 2011, according to China's Rural Economy (2010-2011), a report released Tuesday by a leading think tank.

According to China Daily, fertilizer prices, which increased during the fourth quarter last year, were likely to keep rising this year while stock feed prices are also likely to rise, the Chinese Academy of Social Sciences (CASS) said in the report.

The CASS report also predicted grain prices, especially of corn, to continue to trend upwards in 2011. Further, the report urged greater efforts to stabilize agricultural production costs, by increasing supply and tightening market regulations.

China's annual grain output is estimated to reach 550 million tonnes in 2011, the report said.

China's grain output rose 2.9 per cent year-on-year to 546.41 million tons in 2010, marking it the seventh consecutive year of growth for China's grain output.

On foreign trade of agricultural products, the report said imports and exports of China's agricultural products are both expected to slow in the medium and long term.

Statistics from the Ministry of Agriculture showed that China's export volume of agricultural products registered an average of 13.2 percent annual growth from 2002 to 2010.

According to the report, China has maintained a high rate of grain self-sufficiency.

In 2010, China's domestically-grown rice, wheat and corn is estimated to have accounted for about 99.8 percent, 98.9 percent, and 99.1 percent of the total domestic grain market share, the report said.

Feed Outlook - April 2011
The recent grains stocks report confirms that supplies are tight, according to Tom Capehart and Edward Allen in the latest report from the USDA Economic Research Service.
 

Summary
The Grain Stocks report issued by USDA’s National Agricultural Statistics Service (NASS) at the end of March shows relatively tight March 1 stocks for each of the feed grains. US corn feed and residual use is lowered 50 million bushels due to the recent run-up in corn prices and increased prospects for wheat feeding this summer. Corn used to producer ethanol is increased by 50 million bushels this month as ethanol production continues at near-record levels. The midpoints of the forecasts of the marketing year average prices received by farmers for corn, sorghum and oats are unchanged this month but the price ranges were narrowed. World coarse grain production and consumption are increased, especially for Sub-Saharan Africa, boosting global ending stocks prospects slightly.



Figure 1. US feed grain average prices received by farmers
Source USDA, National Agricultural Statistics Service, Quick Stats
Domestic Outlook
Domestic supply and use of feed grains unchanged from last month
US feed grain supplies for 2010/11 remain at 380.3 million metric tons this month, unchanged from last month’s projection but down 4.4 per cent from last year. Total use of the four feed grains is projected to be 359.4 million metric tons. With demand exceeding supply, ending stocks are expected to be drawn down to 20.9 million metric tons, the lowest level since the end of the 1995/96 marketing year.

Feed and residual use for the four feed grains plus wheat on a September-August marketing year basis decreased by about 0.7 million metric tons from last month to 143.8 million. Grain-consuming animal units (GCAUs) are projected at 93.0 million this month, down slightly from last month's 93.3 million. Feed and residual use per animal unit is unchanged this month at 1.54 tons, the same as last year.

Grain stocks report confirms tight stocks situation
The Grain Stocks report, issued by USDA’s National Agricultural Statistics Service (NASS) on 31 March 2011, shows relatively tight stocks for each of the feed grains. Corn stocks on1 March were pegged at 6,523 million bushels, down 15 per cent from the previous year. Stocks were considerably lower than most trade estimates but about what USDA was expecting. Within a few days of the Grain Stocks report, May corn futures rose more than $1.00 a bushel, and prices exceeded the previous all-time high for the nearby contract, providing evidence that more price rationing needs to occur. With incentives to feed wheat this summer



Figure 2. Corn feed and residual: comparison of first half of year versus second half of year
Source USDA, World Agricultural Outlook Board, WASDE
due to favourable wheat prices relative to corn, corn feed and residual use is lowered by 50 million bushels to 5,150 million bushels, offset by an increase in wheat feeding expected this summer.

Feed and residual use in the second half of the marketing year, forecast to be about 1,517 million bushels, is expected to be only 29.5 per cent of the 5,150 million bushel marketing year total. This would be the lowest share since at least 1975. Feed and residual use in the second half of the year is expected to be the second lowest in absolute terms since 1975, behind the drought year of 1983. It would be down slightly from the 1,571 million estimated for 1995/96. Since 1995/96, corn used for ethanol is up more than 12-fold, adding substantially to available supplies of feed byproducts.

Projected sorghum feed and residual is increased by 10 million bushels this month and oat feed and residual is decreased by 15 million bushels, reflecting feed and residual use to date as indicated by the March 1 stocks. Feed and residual use for barley remains unchanged from last month.

Corn and sorghum used for ethanol is increased
Corn used for ethanol is projected up 50 million bushels from last month at 5,000 million bushels for 2010/11. Sorghum used for ethanol is increased by five million bushels from last month. Ethanol production data are incomplete for the first half of the marketing year, as February data have not been released by Energy Information Administration (EIA). Monthly ethanol production for January 2011 (the latest available data) was record high at 1,181 million gallons. Ethanol corn use for February likely declined from January based on weekly EIA data for ethanol production. Weekly production data also suggest corn use for ethanol during March will be nearly as high as in January.



Figure 3. US corn: Central Illinois cash and average farm price, monthly
Sources: USDA, Agricultural Marketing Service, Weekly Grain Market News Summary, and USDA, Economic Research Service, Feed Grains Database





Figure 4. US sorghum: Kansas City cash and average farm price, monthly
Sources: USDA, Agricultural Marketing Service, Weekly Grain Market News Summary, and USDA, Economic Research Service, Feed Grains Database
Combining the February estimate with reported monthly ethanol production indicates that September-February corn used for ethanol was up 14 per cent from the first half of 2009/10.

Corn export for 2010/11 are projected at 1,950 million bushels, unchanged from last month but down 37 million from the previous year. Sorghum exports are lowered 10 million bushels to 140 million bushels due to the slow pace of sales and shipments caused by tight US supplies.

Even with record-high prices, total disappearance of corn is expected to be record high, pushing corn ending stocks for 2010/11 to 675 million bushels, a 15-year low. The corn stocks-to-use ratio is projected to fall to five per cent, matching the record low set at the end of the 1995/96 marketing year. This level translates into about an 18-day supply of old-crop corn at the beginning of the 2011/12 marketing year; however, some new-crop corn is usually harvested and available for use before the September 1 start of the new marketing year.

Minor changes to feed grain prices
The season-average corn farm price for 2010/11 is expected to hit a record level, averaging between $5.20 and $5.60 per bushel. The $5.40 mid-point is unchanged from last month but the range is narrowed by 10 cents. Price ranges are also narrowed for sorghum, barley and oats but the midpoints are unchanged at $5.40, $3.80 and $2.45 a bushel, respectively. The sorghum farm price forecast is a record high.

 



Figure 5. US barley utilisation
Source USDA, World Agricultural Outlook Board, WASDE





Figure 6. Barley prices received by US farmers, monthly
Source USDA, National Agricultural Statistics Service, Quick Stats





Figure 7. US oats utilization
Source USDA, World Agricultural Outlook Board, WASDE





Figure 8. US oats: average farm price, monthly
Source USDA, National Agricultural Statistics Service, Quick Stats
March prospective planting intentions report confirms USDA’s initial projections
US farmers plan to plant 92.2 million acres of corn this year, an increase of four million acres from last year. In February, USDA released the USDA Agricultural Projections to 2020 and forecast 2011 planted acreage at 92 million. Corn acreage increased the most in the Northern Plains region, comprised of Kansas, Nebraska, North Dakota and South Dakota. Corn acreage increased by 1.9 million acres in the Northern Plains, compared with a 1.1-million increase in the Corn Belt States (Illinois, Indiana, Iowa, Missouri and Ohio). The big year-to-year increase for the Northern Plains as compared with the Corn Belt has implications for the national average yield as yields in the Northern Plains are about 15 per cent less than yields in the Corn Belt.



Figure 9. Change in corn planted area from 2010 to 2011 (1,000 acres), USDA farm production regions
Source USDA/National Agricultural Statistics Service Prospective Planting, 31 March 2011
Almost all corn-producing States show an increase in expected corn acreage, with the exception of a 150,000-acre decline in Texas. Texas farmers indicate cotton will provide a much better return, increasing plantings by 548,000 acres.

US farmers also plan to increase plantings of sorghum and barley in 2011, up marginally for both crops from last year at 5.645 million acres for sorghum and 2.952 million acres for barley. Oat plantings are expected to decline to 2.839 million acres.

International Outlook
Global coarse grain supplies boosted this month
World coarse grain production and beginning stocks forecasts for 2010/11 are increased this month, boosting supplies 6.3 million tons. Production is up 4.5 million tons to 1,084.1 million, led by a 2.2-million-ton increase for sorghum, a 1.4-million-ton boost for millet and a 1.2-million-ton increase for corn. Global barley production is reduced 0.4 million tons this month, with rye, oats and mixed grain virtually unchanged.

Most of the increased global sorghum and virtually all the millet production increase are in Sub-Saharan Africa. Although some locations in the region have suffered excess dryness or floods, in general, rains and temperatures have been favourable across most of the region. Sorghum production is up 2.0 million tons for the region to 29.1 million.

There were numerous changes to coarse grain production as all Sub-Saharan countries in the database were reviewed this month but the most dramatic increases are for Niger, up 1.5 million tons to 5.5 million; Sudan, up 1.0 million to 5.9 million; Uganda, up 0.7 million to 3.4 million; Burkina, up 0.7 million to 4.2 million; and Chad, up 0.3 million to 1.6 million. These are all countries where sorghum and millet are used primarily for human consumption, especially among lower income groups, so the economic implications of the increased production are significant.

Although corn production in the region is projected up only 0.4 million tons this month to 54.7 million tons, reduced prospects in South Africa partly offset increases in several other countries. South Africa’s corn production is projected down 0.5 million tons to 12.0 million as dryness during February in the high-yielding eastern part of the Maize Triangle (Mpumalanga) hit corn during grain fill and reduced yields. Area was reported slightly lower as well. With large corn stocks and transportation problems limiting exports, the incentives to plant corn have not been strong enough to maintain area.



Figure 10. South Africa's corn production and yield
Source USDA, World Agricultural Outlook Board, WASDE





Figure 11. Brazil's corn production and yield
Source USDA, World Agricultural Outlook Board, WASDE
Important corn production changes are made this month to forecasts for several countries outside Sub-Saharan Africa. Brazil’s corn production projection is increased 2.0 million tons to 55.0 million. Harvest reports indicate the first-crop production was larger than expected as harvesting conditions were favourably dry in the south. Moreover, second-crop area planted exceeded expectations despite excessive rains and harvesting delays for soybeans in Mato Grosso and Mato Grosso do Sul. High corn prices and well-drained soils have supported corn planting despite excess rain. Good growing conditions supported increased corn production prospects this month for Paraguay, up 0.4 million tons; Cambodia, up 0.3 million; are Saudi Arabia, Thailand, Peru, Ukraine and Jordan, smaller increases.

Corn production prospects are reduced this month for Indonesia, down 1.3 million tons to 6.8 million. Excess rains and high input costs are limiting production. Forecast corn production in Egypt is cut 0.5 million tons to 6.5 million as both area and average yields are reduced. Iran’s production is reduced 0.3 million tons to 1.7 million as area and yields are reported similar to those of the past two years. There are smaller reductions in corn production for Colombia, Russia, Syria, Yemen and Malaysia.

Sorghum production prospects for Australia are up 0.2 million tons this month to 2.4 million as favorable moisture boosted area and yield prospects.

Syria’s barley production for 2010/11 is revised down 0.9 million tons to 0.8 million as area and yield are reported to have been similar to 4 of the last 5 years (much better than in 2008/09). The Syria revision and small changes to several other countries more than offset increased barley prospects for Iran, up 0.4 million tons, and smaller increases for China, Afghanistan, and Russia.

Coarse grain beginning stocks for 2010/11 are up 1.8 million tons this month to 196.9 million. There are small revisions for numerous countries causing changes in beginning stocks of less than 0.1 million tons, but these are offsetting. The largest change is for Iran, with beginning stocks increased 1.3 million tons, with corn up 0.8 million and barley increased 0.5 million. Revisions to historical production back to 2007/08 boosted estimated stocks for corn and barley. Indonesia’s corn stocks are boosted 0.2 million tons to 0.7 million due to reduced use estimated for 2009/10. Russia’s barley beginning stocks for 2010/11 are up 0.2 million tons because of small production revisions for several years of history. There are also increases in 2010/11 coarse grain beginning stocks of 0.1 million tons this month for Saudi Arabia, Peru and Benin. The largest decline in beginning stocks was a 0.2-million-ton decline for China’s barley due to reduced production estimated for 2009/10.

World coarse grain use projected higher
Global coarse grain consumption in 2010/11 is projected up 5.4 million tons this month to 1,125.4 million. Most of the increase, 3.3 million tons, is in Sub-Saharan Africa with increased human food consumption facilitated by increased production. China’s corn consumption is projected 2.0 million tons higher to 164.0 million tons. Half the increase is in feed and residual use and half in food and industrial use. Corn prices in China reflect strong demand supported by economic growth. Brazil’s increased corn production and growth in poultry production supports a 0.5-million-ton increase in feed use. Thai corn feed use is also up 0.5 million tons this month as more is being used domestically and less exported. This month there are increases of 0.3 million tons or less in projected coarse grain use for Iran, Cambodia, Russia, Ukraine, Peru and the EU.

Coarse grain consumption prospects are reduced this month for Syria, down 0.5 million tons due to reduced barley production. Egypt’s corn use is cut 0.5 million tons because of reduced production, with more than half the reduction in food and industrial use. There are also reductions of 0.1 million tons in projected corn use for Colombia, Israel, Saudi Arabia and Indonesia.

Global coarse grain stock prospects increased slightly
World coarse grain stocks for 2010/11 are projected 0.8 million tons higher to 155.7 million tons. Most of this month’s increased supplies are expected to be used, as demand remains strong despite high prevailing prices in most countries. Coarse grain ending stocks in the Sub-Saharan region are projected up 1.2 million tons this month to 11.3 million due to increased production prospects. Iran’s 2010/11 ending stocks are up 1.2 million tons because of increased beginning stocks. Ukraine’s coarse grain ending stocks are up 0.4 million tons this month mostly due to reduced barley export prospects. Saudi Arabia’s coarse grain stocks prospects are up 0.2 million tons due to increased corn stocks and reduced expected barley use. Cambodia’s ending stocks of corn are up 0.2 million tons because of increased production.

Reduced 2010/11 coarse grain ending stocks are projected for China, down 1.4 million tons, due to strong demand for corn. Syria’s coarse grain ending stocks are cut 0.5 million tons, mostly because of reduced barley production. Canada’s ending stocks are trimmed 0.4 million tons as corn import prospects are reduced. Other changes in projected ending stocks were less than 0.1 million tons.

World corn trade boosted slightly; US corn exports unchanged
Global corn trade in 2010/11 is projected to reach 92.4 million tons, up 0.3 million this month. Imports are up 0.9 million tons to 2.0 million for Indonesia as production prospects there are cut. China’s imports are boosted 0.5 million tons to 1.5 million supported by high prices in China relative to the United States in the first half of March. These increases are partly offset by reductions for Canada, down 0.4 million tons to 1.2 million due to the slow pace of purchases, and by reductions of 0.1 million tons each for Israel and Peru.

Corn export prospects are boosted 1.0 million tons for Brazil to 11.0 million due to increased production prospects and the strong pace of exports during the first months of the 2010/11 October-September trade year. These are record-large corn exports for the trade year. Brazil’s March-February local marketing year exports are raised 1.5 million tons to 8.5 million. Paraguay’s corn export prospects are up 0.2 million tons to 1.6 million due to increased production.

Corn export prospects are reduced this month for Thailand, down 0.5 million tons to 0.2 million, the lowest in five years, as domestic use has been strong. South Africa’s exports are trimmed 0.3 million tons to 2.2 million as transportation costs are limiting exports despite large stocks. Rail transport is not working as well as in the past, pushing exporters to truck more corn to ports.



Figure 12. US corn exports by month
Source USDC US Census Bureau
US corn exports remain projected to reach 50.0 million tons in 2010/11 (1.95 billion bushels for the local marketing year). Census data indicate October-February shipments of 17.3 million tons, down one per cent from a year earlier. March corn export inspections were 4.5 million tons, down three per cent from a year ago. However, outstanding export sales as of31 March 2011, were 13.5 million tons, up 37 per cent from the previous year. Strong shipments are expected in the last half of 2010/11 but the 2010/11 outstanding sales carried over to the next year are also expected to be exceptionally large.

US sorghum export prospects reduced
US sorghum exports for 2010/11 are reduced 0.2 million tons this month to 3.6 million – for the local marketing year, down 10 million bushels to 140 million – due to tight US supplies and increased domestic use. The early-season shipment pace has been slow, with Census exports for October-February of 1.3 million tons, down 32 per cent compared to the previous year. March inspections showed some turnaround, reaching 0.54 million tons, up from 0.36 a year ago. But as of 31 March 2011, outstanding sales were 0.70 million tons, down from 0.75 million tons a year earlier.

Global sorghum trade is projected slightly higher this month, with the US export reduction more than offset by an increase for Australia. EU imports were increased 0.1 million tons to 0.8 million based on strong purchases to date. World barley trade is reduced slightly this month to 15.6 million tons, with reductions in exports from the Ukraine due to the extension of export restrictions through the end of 2010/11. Imports by Saudi Arabia are also trimmed.

Thursday, April 28, 2011
CME: Slow Start to Corn Planting Season
US - With news of the slow start to the corn planting season percolating in the markets, the question many are asking is: What does this mean to me and my business? The quick answer predictably is: it depends, write Steve Meyer and Len Steiner.


For corn producers, wet field conditions and the inability to plant the crop in time may mean money left on the table, long nights of worry and extreme toil, racing against time. Studies have shown that corn planted after 15 May may suffer yield loss although much depends on weather during the rest of the growing season. If you are a livestock producer, the slow start to the season adds another element of risk to an already volatile marketplace. Indeed, that volatility may become even more stomach churning as the exchange is contemplating increasing the trading limit for corn from 30 to 50 cents. Supplies of old corn are quickly dwindling and chances are we will start the new marketing year in September with some of the emptiest bins on record. As we have said before, this market has no room for error and we will need above trend yields to start to repair the corn supply situation.


The late start increases the chances that yields may not hit required levels, thus assuring high corn prices in 2011-12. Cattle, hog and poultry producers will likely refrain from any supply increases until they have a better sense of what the crop will be like. The late planting could further delay livestock and poultry expansion. For retailers and foodservice operators, delays in corn plantings imply that wholesale price pressures may persist well into 2012, thus affecting their margins, their customer counts and their plans for future growth.


Advances in technology have made it possible for large farmers to accelerate plantings if weather permits. USDA reported that in week#16 (ending 24 April), just 9 per cent of the corn crop had been planted, compared to 46 per cent a year ago. We had a similar situation in 2008, when in week #16 (ending 20 April) just 4 per cent of the crop had been planted and in week #17 (ending 27 April), 10 per cent of the crop was in the ground. However, by 18 May 2008, 73 per cent of the crop was planted and final yields that year were about the same as the USDA initial trend estimate indicated. See attached table for the relationship between planting dates and final yields. Note that we are using the USDA weekly number identification to make year to year comparisons. One thing that is different this year is that we expect a big increase in corn acres from areas that do not always plant corn. Extreme moisture conditions could cause those ‘intended’ marginal acres to not materialize thus affecting final production prospects. We can still make up the lost ground but risks of a poor crop are increasing with each passing day, especially with forecasts for more precipitation in the next 10 days.

Tuesday, May 03, 2011
Corn And Soybean Prices Continue Erratic Pattern
US - As expected, corn and soybean prices continue to move erratically in a very wide range. Just in the past week, both May 2011 corn and soybean futures had a $0.56 trading range, writes Darrel Good, Agricultural Economist at the University of Illinois.


As the markets make the transition from old crop to new crop dominance, a lot of factors are influencing price expectations.

For soybeans, the Census Bureau soybean crush report released on April 28 revealed that the March 2011 crush was about 10 percent smaller than that of March 2010. Through the first 7 months of the 2010-11 marketing year, the crush was 7.4 percent smaller than the crush during the same period last year. For the year, the USDA has projected a decline of 5.8 percent. Last year, the crush was unusually large in the first half of the year and declined rapidly from April through August. The seasonal decline may be less pronounced this year. Still, the crush for the year may fall marginally short of the current USDA projection of 1.65 billion bushels.

The pace of soybean exports and export sales has declined sharply and export inspections during the weeks ended April 21 and 28 fell below the weekly rate needed to meet the USDA projection of 1.58 billion bushels for the year. Reports of on-going measures in China to cool economic expansion, along with large South American supplies, suggest a continued slow rate of exports.

Expectations about the 2011 U.S. soybean crop have centered on some planting delays for corn and the implication for soybean acreage. With corn planting likely to continue through May, if needed, there is no strong indication yet that planted acreage of soybeans will deviate substantially from March intentions.

For corn, weekly export inspections remain well below the pace needed to reach the USDA projection of 1.95 billion bushels for the year ending on August 31, 2011. Inspections need to average 42.9 million bushels per week to reach that projection. For the 5 weeks ended April 28, weekly inspections averaged 38 million bushels.

The weekly estimates of domestic ethanol production have also been erratic. Based on weekly estimates through April 22, it appears that total ethanol production in March and the first three weeks of April was nearly 6 percent larger than in the same period last year. This compares to the 4 percent increase that is needed from March through August for corn used for ethanol and by-product production to reach the USDA projection of 5 billion bushels.

Little is known about the rate of domestic corn feeding. Declining hog and cattle prices raise some concern about feed demand. However, the feedlot inventory of cattle on April 1, 2011 was 5 percent larger than the inventory of a year earlier. In addition, the rapid switch to wheat feeding that was being discussed a few weeks ago has likely been put on hold as wheat prices have increased relative to corn prices. The June 1 Grain Stocks report, to be released on June 30, will reveal the rate of feed and residual use of corn during the third quarter of the marketing year.

The most discussed item last week was the delay in corn planting and expectations about planting progress over the next two weeks. For much of the corn belt, optimal corn planting dates are believed to be in late April into very early May. Research reveals that corn yields tend to decline as planting moves beyond the optimum window. The declines also tend to accelerate as planting gets later and later. The declines in yield, however, are relative to potential yield. Yield can still be relatively high with late planted corn if the growing season weather is very favorable, but late planted corn would still be expected to have yields below that of corn planted in a timely fashion.

Some corn is planted late every year. For 2011, the questions center on what portion of the crop will be planted late and the degree of lateness. It now appears that areas in the western corn belt will make substantial planting progress in early May. The focus will be on the wet areas in the southern and eastern corn belt and the cool areas of the northern belt.

Most of the intended corn crop will likely get planted, so the most important factor will become summer weather. In 2009, extremely favorable summer weather extended the growing season and more than compensated for planting delays. An examination of weather records, however, reveal that the uniformly favorable conditions of 2009 have been rare.

Uncertainty about consumption and production prospects, along with volatile currency and energy prices, suggest a continued wide trading range for both corn and soybeans.

USDA: World Agricultural Supply and Demand Estimates
According to the US Department of Agriculture, this report presents USDA’s initial assessment of US and world crop supply and demand prospects and US prices for the 2011/12 season. Projections reflect economic analysis, normal weather, trends, and judgment. Because spring planting is still underway in the Northern Hemisphere and remains several months away in the Southern Hemisphere, these projections are highly tentative.


WHEAT
The 2011/12 outlook for US wheat is for reduced supplies with lower carryin and production than in 2010/11. Beginning stocks for 2011/12 are down 14 per cent from 2010/11, but remain the second highest in a decade. All-wheat production is projected at 2,043 million bushels, down 7 per cent from 2010/11. The survey-based forecast of winter wheat production is down 4 per cent, as lower expected harvested area and yields in Colorado, Kansas, Oklahoma, and Texas sharply reduce Hard Red Winter (HRW) wheat production. Partly offsetting is higher production of Soft Red Winter (SRW) wheat with a rebound in area and higher forecast yields. Spring wheat production is expected lower despite higher expected planted area for other spring wheat. A return to trend yields from record levels of the previous 2 years is expected to reduce durum and other spring wheat production. US wheat supplies for 2011/12 are projected at 2,992 million bushels, down 9 per cent from 2010/11.

Total US wheat use for 2011/12 is projected down 7 per cent as lower projected exports more than offset higher expected domestic use. Food use is projected at 945 million bushels, up 15 million from 2010/11 as flour extraction rates are expected to decline modestly from their historical highs during the past 3 years and consumption grows slightly driven by slowly rising population. Feed and residual use is projected at 220 million bushels, up 50 million from the 2010/11 projection as higher corn prices and a rebound in SRW production encourage more summer quarter wheat feeding.

US exports are projected at 1,050 million bushels, down 225 million from the 2010/11 projection. Export prospects are sharply diminished with reduced HRW production and increasing competition as Black Sea production and exports are projected to rebound. US ending stocks are expected to continue their decline from the recent high in 2009/10. At a projected 702 million bushels, 2011/12 ending stocks are expected down 137 million from 2010/11 and 274 million below 2009/10. The season-average farm price for all wheat is projected at a record $6.80 to $8.20 per bushel, compared with $5.65 for 2010/11.

Global wheat supplies for 2011/12 are projected 1 per cent higher as a projected 25.9-million-ton increase in foreign production more than offsets lower beginning stocks and the drop in US production. At the projected 669.6 million tons, global production for 2011/12 would be up 21.4 million from 2010/11. A sharp rebound in FSU-12 production, combined with larger expected crops in India, North Africa, Canada, and EU- 27 account for most of the increase in world wheat output for 2011/12.

Global wheat trade is expected higher in 2011/12 with world exports projected up 2 per cent to 127.3 million tons. Increased supplies in Russia, Ukraine, and Kazakhstan and a return to exporting are expected to increase competition for EU-27 and US wheat. A recovery in production and improved wheat quality in Canada is also expected to increase export competition. Global wheat consumption is projected up 8.4 million tons or 1 per cent with increased feeding and food use expected in 2011/12. Global ending stocks for 2011/12 are projected slightly lower on the year at 181.3 million tons, compared with 182.2 million for 2010/11.

COARSE GRAINS
Projected US feed grain supplies for 2011/12 are nearly unchanged from 2010/11 as record production is offset by the smallest beginning stocks in 15 years. Corn production for 2011/12 is projected at a record 13.5 billion bushels, up 1.1 billion from 2010/11 as a 4.0-million-acre increase in intended plantings and a recovery from last year’s weather-reduced yields boost expected output. The 2011/12 corn yield is projected at 158.7 bushels per acre, 3.0 bushels below the 1990-2010 trend reflecting the slow pace of planting progress through early May. The 2011/12 yield is expected to be the third highest on record. Corn supplies for 2011/12 are projected at 14.3 billion bushels. This is below the 2009/10 record of 14.8 billion bushels, but up 75 million from 2010/11, as a 5-million-bushel increase in 2010/11 imports and a 50-million-bushel reduction in 2010/11 exports boost current year carryout this month.

Total US corn use for 2011/12 is projected down 1 per cent from 2010/11. Corn use for ethanol is projected up 50 million bushels reflecting slow expected growth in gasoline consumption and continued export demand for ethanol in the coming year. Domestic corn feed and residual use is projected 50 million bushels lower than in 2010/11 reflecting increased availability of feed by-products from ethanol production and lower expected residual use as compared with the current year. US corn exports for 2011/12 are projected down 100 million bushels from 2010/11 with larger foreign corn supplies. US corn ending stocks for 2011/12 are projected at 900 million bushels, up 170 million from the current year projection. Stocks remain historically tight with stocks-to-use projected at 6.7 per cent compared with the current year projection of 5.4 per cent. The season-average farm price is projected at a record $5.50 to $6.50 per bushel compared with the 2010/11 forecast of $5.10 to $5.40 per bushel.

Global coarse grain production for 2011/12 is projected at a record 1,146.8 million tons, up 6 per cent from 2010/11. A 52.4-million-ton increase in global corn output to 867.7 million tons accounts for 84 per cent of the year-to-year increase in coarse grain production. Foreign corn production is projected up 25.5 million tons with the largest increases expected in Argentina, China, Russia, Mexico, and Ukraine. Global 2011/12 production is raised for barley, oats, and rye, mostly reflecting a recovery in production in Russia. World production for all three crops remains below recent highs as more attractive returns for corn and oilseeds limit area expansion in these traditional coarse grains. Global corn exports are projected higher for 2011/12 with increases for Argentina, Russia, and Ukraine more than offsetting reductions for the United States, Canada, and Brazil. Global corn consumption is projected at a record 860.8 million tons, up 22.2 million from 2010/11, with nearly all of the increase in foreign markets. World corn ending stocks for 2011/12 are projected at 129.1 million tons, up 7.0 million from 2010/11.

RICE
Projected smaller US 2011/12 total rice supplies, combined with a modest decline in total use, results in lower projected ending stocks. US rice production in 2011/12 is projected at 211.0 million cwt, 13 per cent below 2010/11. Planted area in 2011, based on the NASS Prospective Plantings report, is estimated at 3.02 million acres, down 17 per cent from 2010 and the smallest area since 2008. Harvested area is estimated at 3.0 million acres. Average rice yield is projected at 7,033 pounds per acre, up 5 per cent from the previous year’s crop, which was damaged by excessive summer heat. The projected yield is calculated from the 5-year Olympic average (2006/07-2010/11) by rice class. Imports for 2011/12 are projected at 18.0 million cwt, up 3 per cent from the previous year, but below the 2007/08 record.

US 2011/12 total rice use is projected at a 236.0 million cwt, 2 per cent below the previous year’s record level. US domestic and residual use is projected at a near-record 127.0 million, unchanged from 2010/11 as per capita use of rice has shown virtually no growth in recent years. Exports are projected at 109.0 million cwt, 5 per cent below revised 2010/11 exports. Despite an expected increase in global trade, competition for key markets will be keen as US and competitor supplies are expected to be large. US ending stocks in 2011/12 are projected at 48.6 million cwt, 13 per cent below the previous year. Ending stocks of long-grain and combined medium- and short-grain rice are 32.8 and 14.4 million cwt, respectively (unclassified broken rice totals 1.4 million cwt).

The average milling yield used for 2011/12 is 70.75 per cent. It is based on the 2007/08-2009/10 average milling rate calculated from data supplied by the USA Rice Federation in its monthly rice stocks reports. The 2010/11 market year is excluded from the calculation because milling yields are well below average, largely the result of unfavorable weather.

The US 2011/12 long-grain rice season-average farm price is projected at $11.00 to $12.00 per cwt compared to a revised $11.00 to $11.30 for the previous year. The combined medium- and short-grain price is projected at $15.00 to $16.00 per cwt, compared to a revised $16.85 to $17.15 for the year earlier. The 2011/12 all rice price is projected at $12.00 to $13.00 per cwt, compared to a revised $12.35 to $12.65 per cwt for 2010/11. Large domestic and global supplies and expected lower Asian prices will pressure US prices in 2011/12.

Global 2011/12 total supply and use are each projected to reach record levels at 554.9 and 458.7 million tons, respectively, resulting in a modest decline in world ending stocks. Global 2011/12 rice production is projected at a record 457.9 million tons, up 6.6 million or 1.5 per cent from 2010/11. Large crops are projected for most of Asia including record or near-record crops in Bangladesh, Burma, Cambodia, Indonesia, the Philippines, Thailand, and Vietnam. In contrast, rice crops in many Western Hemisphere nations including Argentina, Brazil, Peru, the United States, and Uruguay are forecast lower than the previous year. Global 2011/12 consumption (which includes residual) is projected at a record, led by increases for Bangladesh, Cambodia, China, Laos, Pakistan, Sri Lanka, and Thailand. Global exports in 2011/12 are projected at a marketing-year record 32.2 million tons, up 0.8 million from 2010/11 with increases expected for India, Pakistan, and Vietnam, while exports from the US, Cambodia, and Brazil are expected to decline. Larger imports are projected for Middle Eastern, Sub-Saharan Africa, and Western Hemisphere markets, although the expected increases are slight. Global ending stocks are expected to decline 0.9 million tons from 2010/11 to 96.2 million. The stocks-to-use ratio for 2011/12 is calculated at 21.0 per cent, down from last year's 21.6 per cent.

OILSEEDS
US oilseed production for 2011/12 is projected at 99.0 million tons, down 1 per cent from 2010/11. Reduced soybean production accounts for most of the decline, but sunflowerseed, canola, and peanut production are all projected below last year’s crops. Soybean production is projected at 3.285 billion bushels, down 44 million from the 2010 crop mostly due to lower harvested area. Soybean yields are projected at a trend level of 43.4 bushels per acre, down 0.1 bushels from 2010. Soybean supplies are projected at 3.47 billion bushels, down less than 1 per cent from 2010/11 as larger beginning stocks partly offset lower production. Soybean ending stocks for 2010/11 are projected at 170 million bushels, up 30 million from last month due to reduced exports.

Soybean crush for 2011/12 is projected at 1.655 billion bushels, up fractionally from 2010/11 as a lower extraction rate offsets reduced total soybean meal demand. Lower soybean meal export demand projected for 2011/12 is only partly offset by a small increase in domestic soybean meal use, leaving total soybean meal use down 1 per cent from 2010/11. Domestic soybean oil consumption is projected to increase 7 per cent mostly due to biodiesel production gains. Soybean oil used for biodiesel production is projected at 3.5 billion pounds, up 1 billion from 2010/11 reflecting a higher biodiesel use mandate.

With lower 2011/12 US soybean supplies and higher South American soybean supplies on hand this fall, US soybean exports are projected at 1.54 billion bushels, slightly below the 2010/11 level despite a projected increase in global import demand led by China. Ending stocks for 2011/12 are projected at 160 million bushels, down 10 million from 2010/11, leaving the stocks-to-use ratio at 4.8 per cent. The US season-average soybean price for 2011/12 is projected at $12.00 to $14.00 per bushel compared with $11.40 per bushel in 2010/11. Soybean meal prices are forecast at $350 to $380 per short ton, compared with $350 per ton for 2010/11. Soybean oil prices are projected at 56 to 60 cents per pound compared with 53.5 cents for 2010/11.

Global oilseed production for 2011/12 is projected at a record 459.2 million tons, up 2.2 per cent from 2010/11. Global soybean production is projected to increase less than 1 per cent to 263.3 million tons. The Argentina crop is projected at 53 million tons, up 3.5 million from 2010/11 crop based on a higher harvested area and yields. The Brazil soybean crop is projected at 72.5 million tons, down 0.5 million from the projected record 2010/11 crop. A 3 per cent increase in harvested area is more than offset by a return to trend yields. China soybean production is projected at 14.8 million tons, down 0.4 million from 2010/11 due to lower area and yields. Higher rapeseed production for Canada, Australia, China, and Ukraine more than offsets lower production for EU-27. For sunflowerseed, production gains for Russia, Ukraine, and EU-27 more than offset reduced production in Argentina. Led by gains in global oilseed production, 2011/12 WASDE-494-4 oilseed supplies are up 2.4 per cent from 2010/11. With global crush projected to increase 3.5 per cent, global oilseed stocks are projected to decline 1.5 million tons to 72.2 million.

Global protein meal consumption is projected to increase 3.6 per cent in 2011/12. Protein meal consumption is projected to increase 7.8 per cent in China, accounting for 54 per cent of global protein consumption gains. Global soybean exports are projected at 98.7 million tons, up 2.8 per cent from 2010/11. China soybean imports are projected at 58 million tons, up 3.5 million from 2010/11. Global vegetable oil consumption is projected to increase 3.5 per cent in 2011/12, led by increases for China, India.

SUGAR
Projected US sugar supply for fiscal year 2011/12 is down 5 per cent from 2010/11. Lower imports more than offset higher beginning stocks and production. Beet sugar production is unchanged and reflects trend yields, while cane sugar production increases with a rebound in Florida. Imports under the tariff rate quota (TRQ) reflect the minimum of US commitments to import raw and refined sugar and projected shortfall. The Secretary will establish the TRQ at a later date. Imports from Mexico are sharply lower due to reduced supplies and increased domestic use in Mexico. Total use is up less than 1 per cent. Mexico’s 2011/12 sugar supply is down 3 per cent with lower beginning stocks and imports more than offsetting higher production. Production is projected to increase due to improved cultivation of sugarcane in Mexico. Imports reflect mainly US exports. Domestic sugar consumption is up, reflecting flat demand for corn-based sweeteners in the soft drinks sector. Exports decline, assuming reasonable ending stocks. For 2010/11, the major change from a month ago is higher US imports following the announced increase in the TRQ and a stronger-than-expected pace of imports from Mexico.

COTTON
The US cotton projections for 2011/12 include lower supplies and offtake relative to last season, resulting in higher ending stocks. With beginning stocks sharply lower than 2010/11, production is projected at 18.0 million bales, reducing the total supply. Projected production is based on planted area from the March Prospective Plantings, combined with above-average abandonment and slightly belowaverage yields due to severe drought conditions in the Southwest. Domestic mill use is projected at 3.8 million bales, the same as 2010/11, while exports are reduced due to lower US supplies and increased foreign production. Ending stocks are projected at 2.5 million bales, 43 per cent above 2010/11, but still the second-lowest level since 1990/91. The forecast range for the average price received by producers is a record 95.0 to 115.0 cents per pound.

The initial world cotton projections for 2011/12 show a sharp increase in production to a record 124.7 million bales, with India, China, and Pakistan accounting for 70 per cent of the increase. A partial easing of supply constraints, combined with projected world economic growth, is anticipated to raise consumption 3.0 million bales, above the 3 preceding years but below the peak levels of 2006/07 and 2007/08. World trade is projected at 40 million bales, mainly reflecting higher import demand by China. World ending stocks are projected to rise to nearly 48 million bales, a 13-per cent increase from the beginning level; however, the stocks-to-consumption ratio of 40 per cent remains relatively tight.

For 2010/11, US production is virtually unchanged from last month, reflecting the final season estimate. Domestic mill use is raised 100,000 bales to 3.8 million, based on indications of higher-than-expected use from Farm Service Agency data. Exports are reduced 250,000 bales as the pace of export sales has fallen sharply over the past month. Ending stocks are now forecast at 1.75 million bales.

Estimated world production for 2010/11 is unchanged from last month, as an increase of 1.0 million bales for China is offset by a like decrease for India. World consumption is reduced, due mainly to reductions for India and Pakistan. China’s imports are lowered 1.5 million bales due to a recent fall-off in demand, which is partially offset by increased imports for Pakistan and Turkey. World ending stocks are raised nearly 1.0 million bales.

Friday, May 27, 2011
April Soybean Crush Smallest Since 2004
US - Two weeks ago, the USDA lowered the projection of 2010-11 marketing year exports of US soybeans by 30 million bushels, to a total of 1.55 billion bushels, writes University of Illinois economist, Darrel Good.


The reduction resulted in a projection of marketing year ending stocks of 170 million bushels, or 5.1 per cent of projected consumption. That is a more comfortable level of stocks than the previous projection of 4.2 per cent of consumption.

The projection of the marketing year domestic crush of soybeans was unchanged at 1.65 billion bushels, 102 million (5.8 per cent) less than the crush during the previous year. For the past two months, we have chronicled the pace of the domestic crush as estimated by the Census Bureau. The April 2011 crush estimate was released today and revealed a continuation of a very slow pace of crush (figure 1). [Note: The Census Bureau estimates for April are reported as released. Revision in some estimates may be required since calculations of combined meal and oil production per bushel of soybeans crushed during the month exceeded 60 pounds.] The April crush was estimated at 128 million bushels, 7.1 million bushels (5.2 per cent) fewer than crushed in April 2010 and the smallest crush for the month since 2004. The monthly crush has been below 128 million bushels only 3 times since September 2004. Those low totals occurred in either August or September. Cumulative crush for the marketing year to date (September 2010-April 2011) totalled 1.143 billion bushels, 89 million (7.2 per cent) below the total of the previous year.


The slow pace of the domestic crush so far this year reflects a combination of higher product yield per bushel of soybeans crushed and (mostly) a slow-down in soybean meal consumption. Soybean meal consumption during the period September 2010 through April 2011 was 6.4 per cent less than during the same period in the previous year. The largest decline, 22 per cent, was in the export market, as a rebound in South American soybean production has provided more competition for US soybean meal. Consumption of US soybean oil during the same period was about two per cent below that of the previous year. Month-end soybean oil stocks remain large even as the soybean crush and resulting soybean oil production have declined. Stocks at the end of April were marginally smaller than stocks of a year earlier (figure 2). Stock levels below those of a year ago may continue through the end of the marketing year since stocks were very large, at least through July, last year. The USDA projects year-ending stocks to be 885 million pounds (26 per cent) smaller than stocks at the beginning of the year.


To reach the USDA crush projection for the year, crush during the final four months of the marketing year needs to total 507 million bushels, only 13 million less than during the same period last year. Crush during those four months last year was relatively small so that the projection for this year may still be achievable. A monthly rate of about 127 million bushels will be required.

Thursday, June 02, 2011
CME: Sharp Pullback in Grain Markets
US - Grain markets pulled back sharply on Tuesday following reports over the weekend that Russia would lift wheat export restrictions, which have been in place since last summer, write Steve Meyer and Len Steiner.


Trade reports indicate that feed wheat values in the Black Sea region are currently priced below US corn prices and in the short term this is seen as negative for US corn exports. The pullback may be short lived, however, given the many challenges facing US corn and soybean production this year.


Below are some of the issues:

Some major corn production areas remain behind in plantings and some acres may not be planted at all. The latest crop progress report showed just 19 per cent of the corn crop in Ohio had been planted as of 29 May. The plantings report in March indicated Ohio farmers would plant 3.7 million acres of corn, or 4 per cent of the national acreage. Farmers there have only a few days before making some critical decisions as to whether to abandon plantings and opt for preventive planting insurance. Regardless, the production prospects out of this area are significantly worse than they were back in April. Overall, the latest crop progress report showed that just 86 per cent of the crop acres had been planted as of 29 May compared to 97 per cent a year ago.


There is significant risk of flooding in areas along the Missouri river in South Dakota, Northern Iowa, Nebraska. News reports indicate that the Army Corps is planning to relieve pressure on dams by flooding farmland and this could lead to more lost acres, similar to what happened in the Mississippi Delta. While the estimates of the number of acres that could be flooded vary, it is one more issue that one needs to consider when estimating corn crop supplies that will come to market this fall.


And if producers up North are having to deal with the effects of melting snow and excessive rainfall, producers in the Southern states are coping with one of the worst droughts in the last seventy years. Many areas in Texas are experiencing exceptional drought conditions and this will negatively impact corn and wheat supplies coming from there. USDA issued its first crop condition report on Tuesday and overall it showed that 6 per cent of the national corn crop currently in the ground is in poor/very poor condition, 2 points higher than the comparable period a year ago. However, 31 per cent of the corn crop in Texas was rated as poor/very poor. The corn plantings survey in March pegged Texas corn acres at 2.15 million acres, about 2 per cent of the national crop. The winter wheat condition in Texas and surrounding areas is even worse. The crop progress report showed that 76 per cent of the wheat crop in Texas is in poor/very poor condition, compared to just 9 per cent a year ago. Spring wheat plantings are also very behind and this will tend to lift the overall grain complex.
Bottom line: The fact that Russia lifted its export ban may have provided a bit of relief for grain prices but exceptionally tight US corn supplies and production challenges on many fronts will likely cause the market to maintain significant risk premiums in place, impacting US livestock and poultry production for the remainder of 2011 and in 2012.

Thursday, June 09, 2011P
CME: Output of Sorghum, Barley & Oats Falling
US - Output levels for sorghum, barley and oats have been falling for many years, write Steve Meyer and Len Steiner.


In response to our discussion yesterday regarding dried distillers grains with solubles (DDGS), the major by-product of corn ethanol production, our friend Dr. Tom Elam of FarmEcon LLC sent a note urging us to also consider the other three major feed grains – grain sorghum, barley and oats. Dr Elam wrote: 'Corn acres have grown at the expense of the other three feed grains, and not by a little bit. When you look at total feed grains + DDGS feed use the trend is down, not flat.' The authors says they were aware of this impact of increasing corn acres but did not have the space to discuss the issue in the previous edition – so they address the topic now.

As can be seen in the graph below, the output levels for these three 'other feed grains' has been falling for many years. Barley output in 2010 was less than half the level of 1990. Oats output was only 27 per cent as large as it was in 1990 and sorghum production was 40 per cent lower than in 1990. Total sorghum, oats and barley output in 2010 was only 45 per cent as large as the production of those three grains in 1990.


And, while the rate of decline has slowed, the acreage and production levels for these three grains have fallen since 2003 – the beginning of the nine-year period that they mentioned in the previous DLR as being a period of flat corn + DDGS availability for livestock and poultry feeders. In fact, the total acres planted to these crops has fallen from 19.365 million in 2003 to just 11.414 million in 2010. Production has fallen from 833.885 million bushels to only 606.863 million bushels during that same time period. USDA has projected that the total acres planted to these three crops will grow this year by 22,000 to 11.436 million.

Will the meat/poultry complex finally see a respite from the production and price pressure of the US broiler sector soon? Recent USDA data for the number of broiler-type chicken eggs placed in incubators certainly suggest that is possible. Egg sets have been between 0.3 per cent and 2.2 per cent lower than one year ago over the past four weeks. It is the first string of four weeks in which egg sets have fallen relative to one year earlier since the last two week of 2008 and first two week of 2009. After robust growth of 3.3 per cent in 2010, total US egg sets are up only 0.3 per cent year-to-date in 2011.


These lower sets should show up as lower placements in the next two to three weeks and those placements should show up as fewer birds slaughtered five to seven weeks past that point. The exact timing depends on which type of bird is seeing reduced output. Today's 'meat chickens' are divided between two pretty distinct sub-sectors – the small birds that are primarily processed into chicken parts for food-service and the big birds (7-9lbs) that are boned out to produce boneless chicken products. Heavier weights imply a changing product mix rather than longer feeding as is frequently the case in the pork and beef industries.

A reduction in broiler output would be good news for everyone, say the authors, including the companies producing broilers. Retail chicken prices have held very close to year-ago levels in recent months while beef and pork have set new record highs. The low relative price of chicken has been a drag on beef and pork demand and low wholesale chicken prices have had broiler margins in the red since last fall. Some companies may be able to stand such losses but some cannot and most observers believe more consolidation is on the way in the broiler sector.

How many crop acres have been lost due to wet conditions and flooding? That is a common question we are hearing at this week's World Pork Expo in Des Moines. Dr Robert Wisner of ISU provided a summary of anecdotal evidence to a meeting earlier this week. NDSU reports two million acres of prevented planting in North Dakota. Missouri had 570,000 acres flooded before the coming Missouri River flood. Mississippi estimates it has lost 600,000 acres while Louisiana has lost 280,000 of crop land. Another 500,000 were listed for Illinois and as much as one million acres are estimated lost in Arkansas. Then add 450,000 of corn and 350,000 of beans in the Missouri Valley from South Dakota through Missouri.

Monday, June 13, 2011
CME: Lower Harvested Corn Acres Expected in 2011
US - The latest USDA supply/demand estimates are getting a lot of coverage in the press, and for good reason, write Steve Meyer and Len Steiner.


Normally USDA does not change its estimates of the acres planted in its June report (although it has happened before) as it waits for the results of the June acreage survey. The results of that survey will be published on 30 June in the Acreage report. There has been enough information on planting delays and flood damage that USDA felt compelled to adjust its supply calculations for the upcoming corn crop. The most recent estimate puts planted corn acres at 90.7 million, 1.5 million acres less than the May estimate but still 2.5 million acres higher than a year ago. It is also important to note that USDA increased the abandonment rate as evidenced in the number of acres harvested.


Last year, the ratio of harvested to planted acres was 92.3 per cent and that ratio was used in the May estimates. However, damage due to flooding is expected to lower the ratio to 91.7 per cent. Consequently, harvested acres this fall are expected to be about 1.9 million acres less than a year ago. This revision in planted and harvested acres removed 305 million bushels from the expected corn output from the upcoming harvest. In previous years, such a change would be notable. Given that we are expected to start the year with minimum pipeline supplies, this revision in output is seen as potentially explosive for new corn crop prices.

While the current revisions provided a jolt to the market and caused corn futures to hit record highs on Thursday (futures were slightly lower in overnight trading), we will have to wait for the June Acreage report to get a better sense as to the size of the crop farmers put into the ground this spring, the authors write. USDA did not make any changes as to the expected yields for the upcoming crop. While there is a lot of concern about corn yields from areas that were planted late (ECB), many states in the WCB are seeing very good corn crop conditions. In the latest report, USDA rated 81 per cent of the Iowa corn crop in good/excellent condition. With plenty of risk already built into the market, and plenty of weather events, USDA likely decided to defer on the yield issue until the crop condition picture becomes clearer.


On the demand front, USDA decided to lower feed use by 100 million bushels, reflecting profitability issues in livestock and poultry industry and expectations for lower meat production in late in 2011 and 2012. Corn exports and ethanol demand were left unchanged. Higher energy prices and tight world corn supplies remain long term bullish for corn prices and will further pressure already razor thin pipeline supplies. The export issue is particularly critical. Trade likely noted that USDA changed how it calculates China corn use, raising expected China corn consumption 8 per cent from previous estimate. World corn stocks at 111.89 million MT now 13 per cent less than May estimate and 22 per cent lower than in 2009/10.