U.S. farmers harvested an estimated 14.407 billion bushels of corn this past year
While the grain markets were fairly quiet at the close of 2014 and into 2015, these five grain market lessons came through loud and clear this past year.
Lesson 1: U.S. farmers are able to produce staggering amounts of corn and soybeans. According to recent estimates by USDA, farmers harvested 14.407 billion bushels of corn, with an average yield of 175 bu. per acre.
“I think we are finding out the genetics are there to produce that type of record crop,” says Alan Brugler, president of Brugler Marketing and Management in Omaha, Neb., in light of the advances in seed technology.
Surpassing its traditional average yield in the low 40s, soybeans averaged 47.5 bu. per acre for an estimated total of 3.958 billion bushels.
Will farmers produce another bumper crop of soybeans and corn in 2015? It’s hard to say. “Sometimes, it takes a decade to break a yield record,” says Gregg Hunt, a broker at Archer Financial Services in Chicago.
Lesson 2: The world wants U.S. grain, especially when it’s cheap. The U.S. shipped $152.5 billion worth of agricultural products in fiscal year 2014, according to USDA numbers released this past fall. While that’s a new record, it doesn’t include the flood of exports in October and November.
Who’s consuming all that grain? The Chinese are modernizing their hog industry, Hunt explains, from small
rural farms to large-scale operations.
Lesson 3: Seed technology is both an opportunity and a challenge for global markets. New traits and better genetics are enhancing yields, but those benefits are also causing export headaches. Just ask Syngenta, which has been dealing with China’s rejection of Agrisure Viptera corn from the U.S. While the MIR162 trait was accepted for import into China in December, the situation raised questions about the ability of the U.S. supply chain to effectively handle such situations and segregate commodities to meet end users’ requirements.
“I think this is a big issue as we go from [corn or other products] being a pure commodity to a commodity with descriptives,” Brugler explains. “They’re really not commodities anymore—they’re products.”
Lesson 4: Farmers can be patient sellers. When corn prices plunged this past October, instead of giving their grain away, farmers built more storage, bagged it, piled it on the ground and sat tight. As a result, corn and soybean prices rallied.
Lesson 5: U.S. infrastructure might not be up to the job of record exports, record crops and record oil. Transportation has always been a challenge for farmers in the Upper Midwest, and 2014 was especially tough. In North Dakota, where grain competes with the Bakken oil on the tracks, the weak basis shoved corn prices below $1.80 per bushel.
“We had record volume, additional competition from oil and bad weather, which slows grain movement,” Brugler says. “I think it was probably as bad as it gets ... and it highlights the fact infrastructure is not necessarily there to support record grain production.”
While the Mississippi and the rest of the inland waterway system also transport millions of bushels of corn and soybeans to ports on the Gulf of Mexico for export that system is aging, with hundreds of millions of dollars in maintenance needs. Lockmasters are already concerned about this spring and how they will move 2014’s record crop once farmers start selling.