A Mixed Bag

December 4, 2009 09:49 AM

The cards are in place for a banner export year for 2009/10: Crop prices are expected to average below those for the 2008 crop, a weak dollar makes U.S. products cheap to foreign buyers, fuel and freight rates have eased and there are signs the worldwide recession may be abating.

In fact, USDA projects soybean and corn exports above last year. The prospects for wheat, on the other hand, are downright dismal. However, some analysts believe we won't hit the government projections. Here's what the experts see ahead.


> "U.S. soybeans continue to roar ahead, with the U.S. as the sole global exporter so far in 2009/10," says Doug Whitehead of Rabobank, based in London. "A lack of available exportable surpluses in other countries, particularly Brazil and Argentina, have allowed shipments to track 13% above the five-year average. The challenge for the U.S. will be to ensure actual soybean shipments are front-ended so sales aren't switched to South America when their new crop is harvested early in 2010."

Bill Biedermann of Allendale adds this caution: World soybean stocks are pegged at 57 million metric tons—35% above last year and the 10-year average. "That is equal to 2.1 billion bushels or two-thirds of a U.S. crop. If you placed 35,000-bu. bins side by side from Chicago to Omaha, you still would not have enough bins to store all those beans."

103%  USDA's November projection vs. 2008 crop
110%  Year-to-date cumulative sales vs. same time last year


> Competition from Eastern European corn and feed-quality wheat is contributing to a slowdown in U.S. sales, says Allen Baker, USDA economist. "Also playing a role are South American exports, the slow U.S. harvest, concerns about U.S. corn quality and increases in U.S. prices partly influenced by funds investing in commodities as an inflation hedge."

To reach USDA's forecast, weekly corn exports will need to exceed the five-year average by 10% in the remainder of the year, Whitehead figures. Rabobank believes the needed catch-up is unlikely to materialize and USDA will make further reductions in exports.

China could be a wild card this year, counters Jerry Gulke of Gulke Group: "With compound feed usage rising 17% year-over-year the past two years, it seems the question is not if but when China buys corn or more distillers' dried grains from the U.S."

113%  USDA's November projection vs. 2008 crop
112%  Year-to-date cumulative sales vs. same time last year


> Prospects for wheat exports are bleak. "USDA revised U.S. exports down by 25 million bushels—a 31% drop in two seasons and significantly below the five-year average," Whitehead notes. To even make USDA's forecast, U.S. exports will need to reach 12.1 million bushels per week in the remainder of the marketing season, well above the five-year average, he says. "This appears highly unlikely given a robust Australian wheat crop, ensuring competition in Asian markets. We expect USDA to revise its estimates lower over the coming months, increasing stocks and weighing on prices."

In fact, Whitehead says, "If U.S. wheat is to become more competitive on the world market, prices would need to fall significantly relative to Black Sea and EU prices. U.S. soft red winter wheat export prices f.o.b. the Gulf for shipment to Egypt [in mid-November] were 22% above Russian prices and 13% above EU prices."

86%  USDA's November projection vs. 2008 crop
65%  Year-to-date cumulative sales vs. same time last year

Top Producer, December 2009

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