In this file:
· Corn Price Volatility Could See Repeat of 2008
· Global Grain Stocks Drop Dangerously Low as 2012 Consumption Exceeded Production
· Morning markets: strong China data foster gains in ag prices
· Corn dips despite IGC cut to world supply hopes
· DJ U.S. Grain, Soy Futures Rise; Stabilize After Thursday Setback
· Corn Extends Best Run in Year With Goldman Bullish: Commodities
· DJ U.S. Corn Up On Domestic Demand, Dry Argentina Weather
· DJ Soybean Futures Mixed as Traders Curb Risk
· DJ U.S. Wheat Slightly Up on Corn's Gains, Drought in Plains
Corn Price Volatility Could See Repeat of 2008
By: Fran Howard - AgWeb
January 17, 2013
Corn ending stocks are at projected at dangerously low levels. Coupled with ongoing drought, scarce stocks could send prices soaring or crashing just as they did in 2008 and 2009, when prices rose to record-highs only to crash following the Great Recession.
In its latest World Supply and Demand Estimates (WASDE), USDA lowered its corn carryout from 647 million bushels in December to 602 million bushels. Balanced against projected corn demand, the new ending stocks figure puts the stocks-to-use ratio for U.S. corn at only 5.3%, well below the historical average of 12 to 13%, and one of the lowest stocks-to-use ratios ever, says Chad Hart, agricultural economist with Iowa State University. Last year’s corn stocks-to-use ratio was 7.9%, and the year before that, the ratio was 8.6%.
The Drought Card
The worrisome thing about having such a low stocks-to-use ratio for corn is that subsoil moisture is short across most of the western Corn Belt, where drought still lingers.
"The potential for price volatility is just as great in 2013 as we saw in 2008," says Hart. "With continued drought we could have record-high corn prices." If drought ends, and the U.S. crop is a bumper, the worry is that corn prices could plunge. "And the threat of recession still hangs over the market as well," he adds.
According to the High Plains Regional Climate Center, drought conditions persist in the portion of the western Corn Belt covered by the center, which includes Nebraska, North and South Dakota, and Kansas. Severe or extreme drought conditions now cover 86% of the region, with moderate drought covering 93%.
On-farm corn stocks have also fallen, according to USDA’s quarterly Grain Stocks report. Corn stored in all positions on December 1, 2012, stood at 8.03 billion bushels, down 17% from a year earlier. Of those stocks, 4.59 billion bushels were stored on farms, a 26% drop from the previous year. Off-farm stocks, at 3.44 billion bushels, were 1% smaller than last year.
The world stocks-to-use ratio at 12.3% is also dropping, down from last year’s 13.5%, according to the latest WASDE report...
Global Grain Stocks Drop Dangerously Low as 2012 Consumption Exceeded Production
By Janet Larsen - Earth Policy Institute
via Sustainablog - January 17, 2013
The world produced 2,241 million tons of grain in 2012, down 75 million tons or 3 percent from the 2011 record harvest. The drop was largely because of droughts that devastated several major crops—namely corn in the United States (the world’s largest crop) and wheat in Russia, Kazakhstan, Ukraine, and Australia. Each of these countries also is an important exporter. Global grain consumption fell significantly for the first time since 1995, as high prices dampened use for ethanol production and livestock feed. Still, overall consumption did exceed production. With drought persisting in key producing regions, there is concern that farmers in 2013 will again be unable to produce the surpluses necessary to rebuild lowered global grain reserves.
Corn, wheat, and rice account for most of the world’s grain harvest. Whereas rice and most wheat are consumed directly as food, corn is largely used for livestock and poultry feed and for industrial purposes. Climbing demand for corn-intensive meat, milk, and eggs plus the recent increased production of corn-based ethanol have made corn the world’s leading grain since 1998. In 2012, the global corn harvest came in at 852 million tons, while 654 million tons of wheat and 466 million tons of rice were produced. Wheat takes up the most land because corn yields are typically much higher, averaging close to 5 tons per hectare globally compared with about 3 tons per hectare for wheat and rice. (One hectare = 2.47 acres.) In the United States, corn yields in the top-producing areas exceed 10 tons per hectare when conditions are favorable.
Nearly half the world’s grain is produced in just three countries: China, the United States, and India. China produced an estimated 479 million tons of grain in 2012—its largest harvest ever—compared with 354 million tons in the United States. India harvested 230 million tons. The countries in the European Union together produced 274 million tons. (See data.)
The 2012 U.S. grain harvest was 8 percent smaller than the year before. The heat and drought that gripped nearly two thirds of the contiguous United States during the summer was particularly severe throughout the midwestern Corn Belt. As temperatures soared, so did corn prices, hitting an all-time high of $8.39 a bushel on August 21st. Yields in Iowa, the top corn-producing state, were down 20 percent from 2011. In Illinois, typically the number two producer, yields dropped by 33 percent, ending up at the lowest level since the historic 1988 drought. As of January 2013, each state’s farmers have collected more than $1 billion in crop insurance payments.
The total U.S. corn harvest came in at 274 million tons, down from 314 million tons the year before. The drop would have been far worse were it not for strong production in states less affected by dryness or with ample irrigation; in fact, Minnesota and North Dakota had record high output. The result was that some of the trains and barges that normally transport corn out of the Corn Belt reversed routes to bring corn in for meat and ethanol producers. U.S. corn stocks fell to 15 million tons, enough for just 21 days at current consumption levels. Such a low corn-stocks-to-use ratio—unseen before by farmers working the land today—presages further price volatility.
As high corn prices shrank ethanol’s profit margins, a number of distilleries suspended operations. U.S. corn use for ethanol dropped to 114 million tons, down from 127 million tons in 2011. About a third of the total U.S. grain harvest went to fuel for cars.
The reduction of corn use for ethanol production and wheat use for feed contributed to an abrupt pause in the growth in global grain consumption, which over the past decade averaged close to 40 million more tons per year. January 2013 estimates by the U.S. Department of Agriculture put 2012 global grain consumption at 2,284 million tons, down 27 million tons from 2011. Even with the drop in use, global grain production fell short of consumption by 43 million tons.
Global grain consumption has exceeded production in 8 of the last 13 years, leading to a drawdown in reserves. Worldwide, carryover grain stocks—the amount left in the bin when the new harvest begins—stand at 423 million tons, enough to cover 68 days of consumption. This is just 6 days more than the low that preceded the 2007–08 grain crisis, when several countries restricted exports and food riots broke out in dozens of countries because of the spike in prices.
Grain prices receded somewhat during the recent recession, only to jump again in 2010 when heat and drought withered wheat in Russia, prompting an export ban. The poor prospects for the 2012 harvest led to the third spike in world market prices in just six years. This time around, even with its 2012 harvest forecast to be smaller than in 2010, Russia announced that it would avoid suspending exports...
more, including links, charts
Morning markets: strong China data foster gains in ag prices
09:56 GMT, Friday, 18th Jan 2013, by Agrimoney.com
Which way for grain and oilseed prices now?
Did the setbacks of the last session indicate an end to the rising trend sparked by last week's US Department of Agriculture cuts to estimates for domestic corn and wheat supplies at the close of 2012-13?
Or was it a mere pause within a rising trend?
Brian Henry at Benson Quinn Commodities was not so upbeat over prospects, flagging forecasts for some moisture in Argentina heading towards the end of January, easing concerns over a country where dryness has succeeded flooding as a concern.
He also highlighted March corn's close in the last session just below its 50-day moving average, which it surrendered after only two days closing above it, and a move deemed "not supportive".
"A sideways trading range developing between $7.00 and $7.50 a bushel seems appropriate for the near term," he said.
And that meant wheat was less likely to make much headway either.
"While the wheat market continues to show some strength late in the last session, the supportive factors of the USDA report are getting stale," Mr Henry said.
"The funds are involved, but to a lesser degree as they are still reeling from the 'buy in July and sell in November' pattern in the row crops.
"Outside of some legitimate supportive news in corn and/or wheat, I favour the short side for the time being."
'Downside potential limited'
However, Richard Feltes at RJ O'Brien took a more upbeat view, advising investors "against reading too much into today's low volume sell-off".
"We think end-users and value buyers will emerge on breaks. Downside potential on old crop row crops is limited," although the soy complex looks like being "less resilient in maintaining the old crop bull story".
After all, even if Thursday's strong US export sales data for all three major crops were spurred by prices no longer available, other demand signs are firm.
There is "no sign of rationing in the hog sector", while "chicken producers continue to enjoy above average margins on heels of buoyant retail broiler prices", Mr Feltes said.
"I suspect that ag marks will claw back more risk premium into a three-day weekend," with US markets closed on Monday for Martin Luther King day.
Investors still undecided were given a nudge in the bullish direction from broader financial market sentiment, which was buoyed by data showing China's economy growing by 7.9% in the last three months of 2012.
The figure beat expectations of 7.8% growth, and ended a run of seven straight weaker quarters, (although it was insufficient to prevent China recording a full-year expansion figure of 7.8%, the lowest in more than a decade).
The data followed further evidence on Thursday of economic revival in the US, where weekly U.S. unemployment hit five year-lows while housing starts soared.
Shares performed strongly in Asia overnight, gaining 1.4% in Shanghai, 1.0% in Hong Kong and soaring 2.9% in Tokyo.
Prices rise ...
Corn dips despite IGC cut to world supply hopes
18:34 UK, 17th Jan 2013, by Agrimoney.com
The International Grains Council lowered the bar on estimates for world corn stocks, citing higher estimates for consumption, but the downgrade failed to prevent corn's rally losing traction after eight days of gains.
The IGC lowered by 3m tonnes to 113m tonnes, a nine-year low, its forecast for world corn inventories at the close of 2012-13.
"The market is particularly tight," the intergovernmental group said, flagging that inventories in the four main exporting countries were now set to end the season at 25m tonnes, 3m tonnes below the previous forecast, and down 46% on average levels.
Stocks in major exporters – Argentina, Brazil, Ukraine and the US – are viewed as particularly significant as they are available to for trade, unlike the inventories in countries such as China, the second-ranked producer, which rarely sells supplies abroad.
The IGC lifted by 15m tonnes to 845m tonnes, citing upgrades to official estimates for the Chinese and US crops, and "brighter prospects for Argentina".
However, the revision was more than offset by a hike to 865m tonnes in the forecast for consumption over 2012-13, with the council flagging the US Department of Agriculture's higher estimate for domestic feed use, as revealed in a slew of data last Friday.
The IGC's estimate for world corn stocks at the close of 2012-13, of 113m tonnes, was lower than the USDA's downgraded 116m-tonne estimate on Friday, which has helped prolong a rally in corn futures to eight successive sessions.
And, it represents less than 48 days' of consumption – the thinnest level of cover for 39 years.
However, Chicago corn futures looked set to break their winning streak despite the IGC report, and separate USDA data showing US weekly export sales of the grain at 393,341 tonnes – up from 12,622 the week before and a figure beaten only once before this season...
DJ U.S. Grain, Soy Futures Rise; Stabilize After Thursday Setback
DJ/Agriculture.com - Jan 18, 2013
CHICAGO--U.S. grain and soybean futures edged higher, stabilizing after Thursday's setback in prices.
Futures were buoyed by traders evening some positions ahead of an extended holiday weekend, with solid demand, tight supplies and weather concerns providing fundamental support.
Chicago Board of Trade grain and oilseed markets will be closed Monday in observance of the Dr. Martin Luther King Jr. holiday.
Yet, advances remain limited, as traders are cautious of aggressively pushing prices further in the face of an approaching South American harvest and signs of price weakness on technical charts...
Corn Extends Best Run in Year With Goldman Bullish: Commodities
By Nicholas Larkin & Whitney McFerron - Bloomberg
Jan 18, 2013 6:08 AM CT
Corn traders are the most bullish in seven weeks as forecasts for the smallest stockpiles relative to demand since 1974 prompted the longest rally in a year and Goldman Sachs Group Inc. to predict near-record prices.
Eighteen analysts surveyed by Bloomberg expect futures to gain next week and six were bearish. A further five were neutral, making the proportion of bulls the highest since Nov. 30. Global consumption will exceed output for the second time in three years after drought from Europe to the U.S. parched crops, the U.S. Department of Agriculture says.
The grain rose for eight successive days to $7.3125 a bushel by Jan. 16 as the USDA said global inventories by Sept. 30 will be 1.4 percent lower than previously expected and, relative to consumption, the smallest since 1974. Prices had slumped for five weeks and hedge funds cut bets on a rally by 59 percent since December on expectations that South American harvests in the first half of the year would boost supply.
“We’re going to see a destocking in the world of grains and products, and everyone is going to finish the season very tight,” said Chris Gadd, an analyst at Macquarie Group Ltd. in London. “Prices need to go to $8 a bushel at least in the second quarter to do the job of slowing down demand.”
Corn rose 4.4 percent to $7.29 on the Chicago Board of Trade this month, extending last year’s 8 percent advance. Prices will jump 13 percent to $8.25 in three months, 2.8 percent below the Aug. 10 record, Goldman said Jan. 13. The Standard & Poor’s GSCI gauge of 24 commodities gained 1.8 percent since the start of January and the MSCI All-Country World Index (MXWD) of equities increased 3.6 percent. Treasuries lost 0.5 percent, a Bank of America Corp. index shows.
World stockpiles will drop 12 percent to a six-year low of 115.99 million metric tons by October, the USDA said Jan. 11. Inventories in the U.S., the top grower and exporter, slid 17 percent from a year earlier to 8.03 billion bushels (204 million tons) on Dec. 1.
Supplies dwindled as dry weather curbed yields, boosting prices to a record $8.49 in August. There was still moderate to exceptional drought across 53 percent of a nine-state Midwest region by Jan. 15, the U.S. Drought Monitor showed. U.S. corn planting begins in April. The International Grains Council said yesterday that global output will drop 3.6 percent to 845 million tons in the 2012-13 crop year.
The slump in prices to a six-month low on Jan. 7 may boost demand for livestock feed. The USDA said domestic meat and poultry production this year, as well as feed consumption, will be bigger than previously expected.
Hedge funds and other speculators cut bullish bets for five consecutive weeks and held a net-long position of 115,113 futures and options by Jan. 8, the least since June 26, U.S. Commodity Futures Trading Commission data show. Futures for delivery in September, just before the next Northern Hemisphere harvest, are trading at $6.125 in Chicago.
Some growing nations may bolster supply. The USDA raised its forecast for Argentina’s harvest by 1.8 percent to a record 28 million tons. Brazil, the third-biggest shipper, after the U.S. and Argentina, will reap 71 million tons, about 1 million tons more than the agency had predicted in December.
U.S. export sales of corn in the four weeks though Jan. 10 were 68 percent lower than in the same period a year earlier, the USDA said yesterday. The London-based IGC expects corn consumption to drop 1.1 percent this year to 865 million tons.
Costlier crops may curb demand from biofuel producers...
DJ U.S. Corn Up On Domestic Demand, Dry Argentina Weather
Owen Fletcher - DJ/Agriculture.com - Jan 18, 2013
--U.S. corn futures up on strong domestic demand for corn used in animal feed
--Prices also up on continued concern about drier weather in Argentina
--Choppy trading possible ahead of long weekend; U.S. grain markets are closed Monday
CHICAGO--U.S. corn futures are trading higher Friday morning, boosted by strong expectations for demand from the meat industry and concerns about dry weather in Argentina.
In electronic trading, Chicago Board of Trade futures for March delivery are up 3 cents, or 0.4%, at $7.27 1/2 a bushel.
Corn futures rallied early this week on heightened expectations for domestic demand for corn used in animal feed. Futures fell Thursday, but some traders still think prices need to move higher to account for the strong demand.
The U.S. Department of Agriculture last week surprised traders by significantly raising its forecast for corn used in animal feed in the current marketing year.
Traders are also still concerned about drier weather in parts of Argentina, another factor that boosted corn futures early this week. The weather in Argentina could turn wetter again at the end of next week, but traders currently are waiting to see how forecasts continue to change.
"We're still eyeing a target in the mid-$7.40s for the March corn contract and believe a trade to that area is possible during the next couple of sessions," said Joe Vaclavik, president of Standard Grain, a Chicago brokerage.
Trading could be choppy on Friday...
DJ Soybean Futures Mixed as Traders Curb Risk
Andrew Johnson Jr. - DJ/Agriculture.com - Jan 18, 2013
--Analysts anticipate choppy trading leading into three-day weekend
--Strong demand continues to provide support for futures
--South American crops are in focus, and traders are cautious
CHICAGO--U.S. soybean futures are trading mixed Friday, finding some stability after Thursday's setback, as traders take a cautious approach ahead of an extended holiday weekend.
Soybean futures fell Thursday as some traders and investors took profits after recent gains.
Chicago Board of Trade soybeans for March delivery remained lower Friday, recently down 2 1/2 cents, or 0.2%, at $14.27 3/4 a bushel.
Analysts anticipate choppy trading leading into the holiday weekend, with traders unwilling to take on added risk. CBOT markets will be closed Monday in observance of the Martin Luther King Jr., holiday.
"It's a three-day weekend, and it will be important from a weather standpoint," said Don Roose, president of brokerage U.S. Commodities in West Des Moines, Iowa.
South American crops are in focus, and traders will be more cautious, as a lot can change with weather during a long weekend, Mr. Roose said.
Companies that rely on soybean supplies, such as food processors and livestock companies, are counting on Brazil, the world's No. 2 producer after the U.S., and No. 3 Argentina to harvest record crops and relieve the strain of tight global supplies. The countries will harvest their crops in the next three months.
The current downturn in rains across Argentina is allowing wetness to ease in northeastern and southeastern crop areas, and corn and soybean conditions are improving there, according to private weather forecaster Cropcast Weather Services. However, moisture shortages are increasing across central and western Argentina and the continued drier pattern there through the next week will allow dryness to build further.
This will begin to increase stress on corn and soybean growth, Cropcast said in a morning forecast.
Meanwhile, strong demand will continue to provide solid fundamental support for bean prices. Robust U.S. soybean export demand, particularly from China, remains a key driver of advances in soybeans.
Traders are concerned that with the supply of U.S. soybeans tight and South American harvests still weeks away, soybean prices will remain supported...
DJ U.S. Wheat Slightly Up on Corn's Gains, Drought in Plains
Owen Fletcher - DJ/Agriculture.com - Jan 18, 2013
--U.S. wheat futures slightly up on higher corn prices, threats to U.S. wheat production
--Forecast for southern plains remains dry
--Choppy trading possible ahead of long weekend; U.S. grain markets are closed Monday
CHICAGO--U.S. wheat futures are trading slightly higher Friday morning, supported by higher corn prices and threats to U.S. wheat production.
In electronic trading, Chicago Board of Trade futures for March delivery are up 1 1/2 cents, or 0.2%, at $7.82 3/4 a bushel.
Kansas City Board of Trade March wheat is down one cent, or 0.1%, at $8.36 a bushel. MGEX March wheat is up 1 3/4 cents, or 0.2%, at $8.71 a bushel.
Wheat is following corn higher Friday. Wheat prices rallied early this week on expectations that tight corn supplies could fuel prolonged demand for wheat to replace corn in animal feed.
Traders also remain concerned about threats to U.S. wheat production. Intense drought conditions in the southern plains could prevent normal development of hard, red winter-wheat crops there.
The National Weather Service has a dry forecast for the southern plains for the next five days. If also forecasts below-average chances of precipitation in the region in the six-to-10-day period and in most of the region in the eight-to-14-day period.
Trading could be choppy Friday as traders adjust positions ahead of a long weekend. U.S. grain markets will be closed Monday, with electronic trading reopening that evening at 8 EST.
Export demand for U.S. wheat has been weak in recent months, and traders are monitoring world export business to see if demand for U.S. supplies could pick up...