USDA Report and Market Trends - Sunday, 03 November 2013

It’s interesting to think back over market movements through the years and notice that some years certainly seemed more bullish or bearish comparatively.  The years from 1996 to 2006 are regarded as bearish marketing years, then from 2006 until recently in 2013 weather related issued and ethanol turned the tide and we have experienced overall bullish markets.  Unfortunately it seems as though the momentum has turned and we are now facing a bearish environment with corn leading the way. 

Since 2005 the world has ramped up to produce more corn than ever before.  During the 2007-2008  marketing years food and grain prices shot higher worldwide and the United States reaped the benefits by exporting a record 60 million tons of corn.  In comparison our last marketing year saw only 18.5 million tons exported, due to our high prices and the availability of products from other exporting countries.  As a whole about 147 million acres have been added to crop production globally since 2005.  Those 147 million acres are found across the world: 

  • 40 million in South America
  • 21 million in East Asia
  • 15 million in South Asia
  • 28 million in the area of the former Soviet Union
  • 14.6 million in sub-Saharan Africa
  • 18 million in North America

                       

 

The USDA believes that it will take some time for the U.S. to regain its market share while some analysts believe that we may never experience the same level of export dominance again.  Will these countries that increased production due to the high prices of recent years now decrease acres given the lower prices of today, or is that even an option? 

This Friday, November 8th the USDA will release the long awaited and highly anticipated WASDE report.  At this point none of the information I have found or analysts that I have listened to are predicting a bullish report based on several reasons:

  • Ohio state yield- 190 bushels per acre!  (Just for one example)
  • When good news doesn’t drive prices higher…Big export numbers reported last week-2 times what was expected- prices rallied for a short time then fell off.
  • No carry in the market to hold for spring delivery.
  • Soybean technicals are weak indicating that beans are at great risk of falling back to August lows with little to no upside potential due to final yields being too big.  The market is looking for a yield average around 43-44 bushels per acre in this report.
  • Corn supplies may exceed a record this year.  Bloomberg’s survey of analysts estimates that the 2013 yield will be close to 14.03 billion bushels, which is 1.3% higher than the last USDA estimate in September.

A couple of pieces of positive information though:

  • China is becoming more urbanized and income levels are on the rise.  So, will they raise crop production or will they import more bushels?
  • Basis is strong right now in many areas.  Some ethanol plants, feed mills, etc. are bidding up prices right now to amounts higher than spring prices.

The Farm Bill continues to be debated by a special committee in the nation’s capital.  With all of the lingering issues from previously proposed versions from the House and Senate a quick decision is not likely.  The committee is comprised of 17 republicans and 12 democrats from the House (mostly from southern states) and 5 republicans and 7 democrats from the Senate (comprised mainly from corn and soybean producing states).

CROP INSURANCE

The 2013 final harvest price for regular crop corn was $4.39 per bushel and $12.87 per bushel for regular crop soybeans. 

PLEASE REMEMBER that All claims will need to be turned into our office by December 1st.

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