Aug 22, 2014
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March 2014 Archive for Farmland Forecast

RSS By: Marc Schober, AgWeb.com

Marc Schober is the editor of Farmland Forecast an educational blog devoted to investments in agriculture and farmland.

USDA Weekly Exports: Week to Week Sales and Exports Decrease

Mar 13, 2014

Sales and exports declined week over week for corn, soybeans, and wheat. Corn and wheat exports remained above their 10-week average. Soybean exports fell below 1 million bushels for the first time since early October.

Weekly U.S. net corn sales for the week ending March 6th in the 2013/2014 marketing year were 683,400 metrics tons (MT), a 55% decrease from the previous week and a 29% decrease from the prior 10-week average. Increases were reported from Japan, South Korea, Taiwan, Colombia, and Mexico. Decreases were reported from Unknown Destinations, and China. Exports were 907,400 MT, a 20% decrease from the prior week, but a 9% increase from the prior 10-week average. The primary destinations were Japan, Taiwan, Mexico, Saudi Arabia, and Peru.

Weekly net soybean sales were 113,500 MT, an 85% decrease from the previous week and a 77% decrease from the prior 10-week average. Increases were reported from Mexico, Japan, Taiwan, Colombia, and Mexico. Decreases were reported from Unknown Destinations and China. Exports were 863,200 MT, a 26% decrease from the prior week and 45% decrease from the prior 10-week average. Primary destinations were China, Mexico, Japan, Taiwan, and Egypt.

Weekly net wheat sales were 476,900 MT, a 14% increase from the previous week, but a 7% increase from the prior 10-week average. Increases were reported from Nigeria, Taiwan, Indonesia, Thailand, Mexico, Japan, and Vietnam. Decreases were reported from Unknown Destinations. Exports were 455,700 MT, a 28% decrease from the prior week, but a 5% increase from the prior 10-week average. Primary destinations were Mexico, Indonesia, Japan, the Philippines, and Israel.

3 13 14 Sales
Source: USDA Foreign Agricultural Service

3 13 14 Export
Source: USDA Foreign Agricultural Service

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WASDE: Grain Exports Less than Expected

Mar 10, 2014

Corn and soybean supplies were reduced due to strong export demand, although futures dropped from six-month highs as analysts expected a larger reduction. The stocks-to-use ratio for soybeans declined to 4.4%, only a 16-day supply, due to strong demand from China. The U.S. wheat balance sheets were unchanged from last month.


Corn

U.S. corn ending stocks for the 2013/14 marketing year were projected 25 million bushels lower to 1.456 billion bushels, due primarily to increased exports. Exports for U.S. corn in the 2013/14 marketing year were increased by 25 million bushels to 1.625 billion bushels, due to a rise in world demand and an increase in shipments in recent weeks. The season-average farm price for corn was narrowed 5 cents on both ends of the projected range to $4.25 to $4.75 per bushel.

World corn production was increased to 967.52 million tons, compared with 966.63 million forecast last month. Production in Brazil and Argentina were unchanged at 70 million tons and 24 million tons, respectively.

WASDE Ending Stocks March 2014

Soybeans

U.S. Soybean exports for 2013/14 were projected at a record 1.53 billion bushels, up 20 million bushels from last month reflecting the record pace of shipments and sales through February. Soybean imports were raised 5 million bushels to 35 million bushels. 

Projected ending stocks for 2013/14 soybeans were lowered 5 million bushels to 145 million bushels and the stock-to-use ratio is now only 4.5%, although analysts were expecting a larger reduction to 141 million bushels. The 2013/14 season-average price range was projected at $12.20 to $13.70, up 25 cents on both ends.

Soybean production for Brazil was reduced to 88.5 million tons from 90 million tons, due to the late-season drought in South America. Soybean production was also reduced for Paraguay by 1.2 million tons due to the dry weather.

Wheat

U.S. wheat balance sheets were unchanged from last month. Global wheat supplies for 2013/14 were increased slightly due to a 0.8 million ton increase in world production, coming from Australia and India.

The season-average farm price for all wheat was increased 10 cents on the bottom end of the range to $6.75 to $6.95 per bushel.

Outlook 

China and other grain importers have taken advantage of the low grain prices in the U.S., although the futures market was expecting a larger increase. Soybean production in South America continues to be strained by heat and drought, with some private estimates well below the USDA by over 10%.

The grain market continues to watch the unrest in Ukraine, although export markets are become more comfortable with the situation. Odessa and four other Black Sea ports, which handle 87% of Ukrainian grain exports, are not in Crimea and unlikely to be disrupted. 

The next major report is the USDA's Prospective Plantings Report coming out on March 31, 2014.
 
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USDA Weekly Exports: Sales Volumes Continue to Increase

Mar 06, 2014

Corn and soybean sales continue their upward trend, significantly outpacing their 10-week averages. Exports for wheat and corn also rose from last week while soybean exports continue to slowly decline from marketing year highs seen in late 2013 early 2014.

Weekly U.S. net corn sales for the week ending February 27th in the 2013/2014 marketing year were 1,518,000 metrics tons (MT), a 81% increase from the previous week and a 58% increase from the prior 10-week average. Increases were reported from Mexico, Japan, Unknown Destinations, Colombia, South Korea, and Taiwan. Decreases were reported from China, Spain, and the French West Indies. Exports were 1,138,100 MT, a 33% increase from the prior week and 33% increase from the prior 10-week average. The primary destinations were South Korea, Mexico, Japan, Egypt, and Peru.

Weekly net soybean sales were 772,700 MT, a 136% increase from the previous week and a 50% increase from the prior 10-week average. Increases were reported from Unknown Destinations, Mexico, Indonesia, Germany, and Spain. Decreases were reported from China. Exports were 1,173,600 MT, a 35% decrease from the prior week and 27% decrease from the prior 10-week average. Primary destinations were China, Indonesia, Mexico, Germany, and Spain.

Weekly net wheat sales were 556,100 MT, a 52% increase from the previous week and a 23% increase from the prior 10-week average. Increases were reported from Mexico, Brazil, Unknown Destinations, China, Taiwan, Chile, and Vietnam. Decreases were reported from Egypt and Nigeria. Exports were 633,000 MT, a 16% increase from the prior week and a 51% increase from the prior 10-week average. Primary destinations were Brazil, Philippines, Egypt, Taiwan, and Mexico.

3 6 14 Sales

Source: USDA Foreign Agricultural Service

3 6 14 exports

Source: USDA Foreign Agricultural Service

For daily articles on farmland and agriculture, visit http://www.farmlandforecast.com/

Ukrainian Unrest and Russian Aggression Result in Unpredictable Grain Market

Mar 05, 2014

News coming out of Ukraine has many bracing for the worst. The most serious standoff between the east and the west since the Cold War has political leaders walking on egg shells. The potential for war is the most dire outcome of the actions being taken in central Europe, but other consequences are beginning to play out across the world.

Ukraine’s importance in the global grain market has grown as the country has become one of the world’s largest exporters of corn and wheat. The ambiguity that has shrouded the country over the past months, but more specifically the past week, has sent corn and wheat prices unexpectedly upward. With global stockpile levels up and production levels estimated at all-time highs, the events unfolding in Ukraine will dramatically impact the availability of grain in 2014.

Ukrainian Unrest

On November 21st Ukrainian President Viktor Yanukovych announced he was abandoning a bailout agreement with the European Union in favor of a Russian bailout proposal. This decision put into motion months of civil unrest, protests, and violence that climaxed on February 20th with the death of more than 80 Ukrainians. Following the most bloodshed in Ukraine since WWII, a new government was formed and a warrant was put out for former president Yanukovych.

Hope was held that peace and a new government would help Ukraine recover from a deep recession, but only days after intense fighting and bloodshed, Russia announced its plans to occupy the Crimea region of Ukraine in order to protect pro-Russian citizens in the region. Along with Crimea in the south, Russia has claimed the need to protect ethnic Russians in Ukraine to the area east of the Dneiper River.

Geographically the split may seem reasonable. The majority of western and northern Ukraine are pro-EU, and a majority of the south and east are pro-Russia. The map below shows the split in the 2010 Ukrainian presidential election. The majority of northern and western Ukrainians voted for pro-EU candidate Yulia Tymoshenko, while the majority of the southern and eastern Ukrainians voted for pro-Russian candidate Viktor Yanukovych.

Ukraine Article
Source: Ukraine Central Election Commission

Economically the split would lead to trouble. The southern Crimean region holds both Ukrainian ports to the black sea and the eastern region holds the majority of the mining, metallurgy, and agricultural industry. A standoff between the two governments has left the rest of the world waiting to see what will unfold.

Global Grain Implications

Ukraine’s global role has increased significantly over the past decade. Following the collapse of the Soviet Union, Ukraine, the largest solely European country, struggled to grow as it began to unravel itself from what was left of the USSR. After a decade of little growth Ukraine entered the new millennium strong. Mechanization of their agricultural industry, improvements in mining and metallurgy, and increased infrastructure created a real rise in the growth of the Ukraine’s economy.

Ukraine’s rich soil and improved agricultural techniques made it the third largest exporter of corn and the sixth largest exporter of wheat in 2013, according to the International Grain Council (IGC). The IGC forecasted their exports to grow by almost 50% in 2014 to 31.8 billion tons, estimates that would put Ukraine second in the world in grain exports only behind the US.

The civilian unrest and ongoing feud with Russia has led to a much unexpected rise in corn and wheat prices over the past two months. Beginning Friday, on the news that Russian troops had entered Ukraine, corn prices in the US have gone up $0.17 or 3.5%. The 2.03% increase seen on Monday was one of the largest day to day gains in the past two years. Corn prices grew over $0.25 in the month of February and increasing over $0.50 since January. Similar month to month growth in corn prices has not been seen since January 2013, and two month growth has not been seen like this since the drought of 2012 when corn grew to over $8.00 a bushel.

The uncertainty over Ukrainian production has led to a redraft of global production forecasts and demand expectations for 2014. In a year where grain prices were expected to hit decade record lows an unexpected change could lead to a reversal.

Chinese Impact

China has been surprisingly quite for the amount of impact the saber rattling between Russia and Ukraine has on them. As Russia’s largest ally, China has normally been very supportive of Russia flexing its muscles supporting their belief of control and support of the region. News of China’s feelings toward the military operations in Ukraine have been mixed. The Russian foreign ministry released a statement saying China agrees with the actions taken by the Kremlin in Ukraine, but China’s foreign ministry has been much less supportive. Reports quote Qin Gang, spokesman for China’s foreign ministry, "It is China's longstanding position not to interfere in others' internal affairs. We respect the independence, sovereignty and territorial integrity of Ukraine."

It becomes complicated because China must tread softly in an effort to appease both Russia and its trading partners in the west, while still keeping in perspective their own commercial interests in Ukraine. In September of 2013 China leased 7.4 Million acres, an area larger than the state of Maryland, from Ukraine’s eastern Dnipropetrovsk region to grow grain and raise pigs. If the protesting and civil unrest didn’t complicate the matter enough, the area that China leased from Ukraine is in the eastern region that Russia is claiming rights and occupation over.

Outlook

Reverberations of the Russian military operations in Ukraine can be felt in many industries all across the world. It can be safe to say that the impact on the agriculture industry was not the focus of any arguments while military decisions were being made in Moscow.

In the short-term grain prices will continue to feed off of the uncertainty around one of the largest exporters of grain in the world. It can be expected that production estimates in Ukraine will fall, helping an already saturated grain market. In the long-term little can be speculated at this time. If Russia holds control over the eastern Dnipropetrovsk, the implications on China’s lease will create an interesting story. We cannot be sure of the outcomes of the decisions made up to this point, but we do know that the impact on the global market will be profound.

For daily articles on farmland and agriculture, visit http://www.farmlandforecast.com 

Grains Rally in Cold Weather

Mar 03, 2014

Extremely frigid temperatures were present throughout the Corn Belt for much of February causing major regional logistic problems. Farmers were reporting equipment failures due to the low temperatures which caused delays in delivering physical grain. Problems and delays are a concern for spring barge traffic on the Mississippi River due to a record pace of freezing on the river and a separate barge crash that spilled oil over a 65-mile portion of the river this month. As a result, local basis prices have been strengthening across the Corn Belt.

Political tension and fighting has risen throughout the month in Ukraine due to a controversial government bailout funded by Russia. Ukraine, the world's third largest corn exporter, may experience export issues if the political unrest continues. Additionally, Export-Import Bank of China recently sued Ukraine for $3 billion for breaching a loan-for-grain contract signed in 2012. China has only received $153 million worth of grain, according to Russian media.

Grain Prices

March corn prices increased this month by 5.3% and closed at $4.57 per bushel, its second consecutive monthly gain. U.S. ending stocks were decreased in this month's WASDE Report by 10.1% to 1.481 billion bushels due to increased exports. U.S. corn is very attractive on the global market at current prices. Strong ethanol production margins have helped support strong regional cash pricing as well. At the USDA Outlook Forum this month, the USDA projected that U.S. farmers will plant 92.0 million acres of corn in 2014, slightly below analyst expectations. The political unrest in Ukraine could significantly boost U.S. exports moving forward, which the markets have started to price in.

The Chinese have continued to reject shipments of U.S. corn containing the unapproved GMO trait MIR162. This month, major grain handlers in the U.S., including ADM, have banned the purchase of MIR162 corn within the U.S. until China approves the trait.

The March soybean contract significantly increased this month by 10.1% and closed at an eight-month high of $14.14. The USDA held ending soybean stocks unchanged in the February WASDE Report, but exports were increased by 15 million bushels, although decreased residual use offset the loss in supply. Fundamentally, soybean pricing is strong with extremely low stocks and high global demand. The USDA estimated 79.5 million acres of soybeans will be planted in 2014 by U.S. farmers at the USDA Outlook Forum. U.S. soybean prices also rallied upon heavy rainfall delaying the South American harvest and logistical delays throughout Brazil.

March wheat prices broke a downward trend this month and increase by 7.9%, closing at $5.99 per bushel. Ending stocks were estimated 50 million bushels lower by USDA in the WASDE Report, due to increased food use and exports. Concern is growing in the U.S. Plains and in the Black Sea region of winter kill risk due to the drawn out winter temperatures. Winter kill does not typically occur until the winter wheat plant starts growing again from winter dormancy in early spring. Lastly, the Ukraine political issues have sent wheat prices higher due to the potential void in the global wheat market if Ukraine exports slow.

South American Crop Condition

Brazil's record soybean production was decreased 2.5% to 88.0mt, according to the International Grain Council (IGC) due to hot and dry weather throughout the late growing season. IGC also cut the Argentina soybean crop outlook by 1.8% to 53.5mt. Conab estimated Brazilian corn production 4.6% lower this month to 75.47mt due to continued dry weather. In other areas of Brazil, where soybean harvest is occurring, heavy rainfall has led to logistical delays on rural dirt roads. Additionally, the Brazilian ports are reporting a 40 to 45 day wait time for vessels to be loaded with grain due to insufficient port infrastructure.

Farmland Values

The Chicago Federal Reserve Bank reported that farmland values increased 5% year-over-year in the Seventh District encompassing Iowa, Wisconsin, Illinois, Indiana, and Michigan. Illinois and Indiana led all state value increases with 14% and 10% year-over-year, respectively. Throughout the fourth quarter of 2013, farmland values increased by 3% in the Seventh District.

In the Tenth Federal Reserve District, non-irrigated farmland values increased 9.2% over the past 12 months, irrigated farmland values increased 7.4%, and ranchland values increased 9.7%. The Kansas City Fed cited limited farmland sales and continued strong demand for the supported increase in farmland values throughout 2013. The Tenth District includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, a portion of New Mexico, and Missouri.

The Creighton University farmland price index decreased by 2.4 points in this month's survey to 41.7. This marks the third month in a row that the index has been below growth neutral. Professor Ernie Goss noted, "This is the third straight month that the farmland and ranchland-price index has moved below growth neutral. With the Federal Reserve continuing to withdraw their economic stimulus, rising interest rates are expected to put downward pressure on agriculture commodity prices and farmland prices."

Farm Income

The USDA Farm Sector Income Report forecasted a net farm income of $95.8 billion, 8.35% above the 10-year average. The forecast did decline from the record breaking $131.03 billion recorded in 2013. Large increases expected in production and decreases in crop prices are likely to undermine farmer income in 2014. Farmer production expenses are expected to fall for the first time since 2009, interrupting what had been a rapid upward movement in expenses. Seeds, fertilizer, and pesticides, are expected to fall a combined 4.7% in 2014.

Outlook

Continued strong exports of corn and soybeans could continue to fuel the domestic grain markets until spring planting estimates are released. The corn market will also closely monitor ethanol blending margins as RBOB gasoline prices have increased faster than corn prices, allowing for even stronger margins for ethanol producers.

We are starting to watch frost and snow levels across the Corn Belt during this drawn out winter. If extremely cold weather persists throughout the Corn Belt in March, farmers will have to prepare for a wet and delayed planting season again. Many areas in the Midwest are consistently experiencing temperatures 30 to 40 degrees below historical averages.

For daily articles on farmland and agriculture, visit http://www.farmlandforecast.com/ 

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