June 2010 Archive for MGEX Research

Fundamentally, Allendale Inc. is preparing for an acreage increase from March to June for corn acres and a decrease for soybean acres. Historically, over the past six years, the average increase for corn acres from March to June has been 2.08%, with a range low of 0.2% in 2005 and range high of 3.8% in 2009. Each and every year, corn acres have increased in the June Planted Acreage report versus the March Prospective Plantings report. In 2010, Allendale suggests June corn acres will increase by 1% to a level of 89.707 million acres versus a March estimate of 88.8 million acres. The corn acres planted are the second highest, dating back to 1944, with 2007’s 93.53 million as the leader.

Of the 18 prereport analytical groups surveyed, there are three that anticipate fewer corn acres in the June versus March reports. It must be noted there is a definite building trend for corn acres versus nearly flat for soybean acres. Combine more acres planted with a trend increase for yield, and we have the makings of record-breaking, sizable corn production with ethanol as a key contributor of demand.

Over the past six years, only last year did we see June soybean acres increase versus March. Of the most recent six years, we have experienced an acreage decrease from the March to June acreage reports by an average of 1.88%. Allendale Inc. suggests soybean acres will decrease by 0.7% to a level of 77.609 million acres in the June acreage report. The low has been a downward revision from the March to June report of 0.5% in 2008 and the high downward revision from March to June of 4.5%.

We can respect farmers' need to rotate corn and soybean crops as well as economics that suggest farmers can make more money per acre for corn versus soybeans.

Why does history continue to advance corn acres over the most recent six years and, most importantly, from the March to June reports?   

 

 

We welcome your questions.........Joe Victor

 

Allendale Inc. welcomes any questions you may have. Call (800) 551-4626 or e-mail research@allendale-inc.com.

 

 

 

 

Fundamentally Allendale Inc could say the world day to day use for corn is trending higher with wheat flat. As you are able to view the chart, corn use looks impressive as it has the largest day to day use and has cracked 2.50 million metric tonnes (98.4 million bushels) projected for the 2010/11 marketing year.  

As you can view the 2008/09 market year had negative growth of 1% for corn vs the year prior but able to pick up 3.4% growth in the 2009-10 market year.

            Impressive is the 7.8% growth in the 2009/10 growth for world soybean use after a disappointing 4% negative growth in the 2008/09 vs year previous. The year to year minimum growth rate for world soybean use has been 4% with exception of 2008/09. Since 2005/06 to 2010/11 marketing year the daily use of soybeans has grown by 20% while corn has gown by 16.6% and wheat by 9%.

            Interesting is how the world population from 2005 to present day has grown by 5.8% according to statistics from the US Census Bureau. Demand for the starches and protein is outstripping world population growth.

            Allendale Inc anticipates the trends most likely to continue for the next five years with the rate of growth annually to favor soybeans and be able to crack the 1 MMT level for the 2013/14 market year. During the same marketing year look for corn demand to be 2.76 MMT. The annual rate of growth for wheat is likely to overshadow by the lack of change in diet even with world population increasing. As a matter of fact there is a college within the northwest which is analyzing with promise to add distiller’s grains within wheat for baking purposes. Just what the wheat does not need at a time when world end stocks to use of 24.7% are at its highest levels since 2001 and USA end stocks to use of 46.8% are at its highest level dating back to 1987.

Allendale Inc believes the long range demand use day by day rest with the soybeans and then corn with wheat coming in a distant third. You will need to analyze your economic return per acre on an annual basis and what ever you do, do not give up complete control of you production and stocks. Allendale Inc can customize the marketing plan which best benefits your particular business.

 

 

We welcome your questions.........Joe Victor

 

Allendale Inc welcomes any questions you may have by calling 800-551-4626 or

e-mail    research@allendale-inc.com

 

 

 

 

            Fundamentally we have a weekly report which does provide data in the form of export sales and shipment but also realize the percent of export sales is declining for corn and wheat while soybeans are trending higher. Rather than export 18 to 20% of a yearly corn crop, the past three years is closer to 15%. When it comes to wheat gone are the days of 48 to 51% of yearly production exported as we are now at a lower range of 39 to an optimistic 44%. The crop which does show signs of an increase are soybeans as we are now exporting 41 to 43% of annual production with 31 to 36% in the review mirror.

            As you are to view via this graph, soybean exports from the US and Brazil continue to ebb higher with wheat in the US and Argentina falling. Be reminded there are planting and harvest time frames which vary for the soybeans and corn verses the wheat in the United States as well as South America. However if you are looking for basis appreciation and futures re-ownership of a commodity at harvest then give the node to soybeans.

            On a monthly basis the US Census Bureau is very good at reporting the soybeans crushed into soybean meal as well as soybean oil. The National Oilseed Processor Association continues to reflect a 6-7 million bushel reduction vs the US Census Bureau. Allendale Inc continues to advise it farmers and end users of the strong pace of exports as well as soybeans crushed.

            USDA continues to advertise its new crop end stocks run 72% above the final estimate. Who better to reflect the inverse in soybeans and soybean meal than the farmer as well as crusher and exporter? At present we have a noted commercial which is presently merchandizing soybeans by canceling deliverable receipts of soybeans as the cash market remains strong.

            Lastly we are not a huge proponate of weather forecast beyond 3-5 days but with the ongoing drought in northern Louisiana, main growing region of China and Canada, we look to the transition between La Nina to El Nino in late July to early August to perceptively be more bullish to soybeans than corn or wheat.

            The question remains as to why farmers plant soybeans within the US, is it basis appreciation, China’s and others demand, rotation of crops, or something else? Do you have complete control with your old and new crop?

 

We welcome your questions.........Joe Victor

 

Allendale Inc welcomes any questions you may have by calling 800-551-4626 or

e-mail    research@allendale-inc.com

 

 

 

 

The latest corn crop conditions are at 76% good to excellent and the market is busy making reference to 2007’s 78% as only better by 2%. Needless to say the 2010 corn crop looks very healthy as viewed via this graph. This year’s corn crop is rated 6% better than last year and 7% better than the five year average. It may be important to realize last year’s crop ratings dropped 1%

with the five year average unchanged at 69% from this report to next week..

Identical to the 2010 corn crop rating of 76% is 1999 and 1998’s 76% good to excellent. In 1999 the crop rating dropped 1% by the following week with 1998 down 2%.

Do not forget we have a June World Agriculture Supply and Demand Estimates report due out on June 10^th and one question you may have is could USDA raise yield on such a good looking crop? If history is a good teacher then the answer is no. In 2007 when crop conditions dropped 1% the corn yield from the May WASDE to June was left unchanged at 150.3 bushels per acre. Of the most recent five years, three (2007, 2006, and 2005) had yield left unchanged with 2009 yield down 1.3% and 2008 down 3.2%. In 1999 and 1998 when conditions were identical to the present 76% good to excellent, yield was left unchanged from the May to June WASDE. It is highly unlikely USDA will increase yield from the May to June WASDE.

USDA has decreased crop condition ratings from now until harvest time whether its last year by 1%, five year average by 8%, 2007’s 15% 1999’s 18% and 1998’s 11%. Make note of it, each year indicated this great looking crop becomes more rough around the edges as we enter harvest

What happens to yield per acre from now by the time we enter harvest? You would think with declining crop conditions, yield would also decline, not so. In 2009, yield per acre actually increased 7%, 2008 up 3.4%, 2007 up 2.9%, 2006 up 3.2%, 2005 down 2%, 1999 up 1.3% and 1998 1.8%. Incredible, even though crop conditions drop, yield per acre overwhelmingly goes higher from the June WASDE to October WASDE.

We know as conditions drop from now until harvest, but yield increases but what happens to price? From June into harvest in 2009, the futures price increased 5%, 2008 price per bushel dropped 45%, 2007 price increased 13.9%, 2006 price increased 36.6%, 2005 price dropped 7.6%, 1999 price dropped 5.7% and in 1998 price dropped 11%. So other than tight stock years, prices normally drop as conditions drop and yield per acre increases from now into harvest.

            The question at hand is do you have a market plan, futures and or options in place for 2010? Can you comfortably say you maintain complete control of your crop(s)?

 

We welcome your questions.........Joe Victor

 

Allendale Inc welcomes any questions you may have by calling 800-551-4626 or

e-mail    research@allendale-inc.com