In this file:
… if it rains this spring and summer to produce a normal corn crop, feed costs could drop to 50 cents for livestock and 35 cents for poultry…
…last year South American suffered a lot with the drought (and you're probably tired of hearing about this), but a lot of people in the United States took time to believe this fact, but didn't believe other information coming out of Brazil about the rebound… Brazil is running to produce a record 85 million metric ton crop of soybeans, and will become the No. 1 soybean producer in the world…
… Through 2020, demand from China is mostly a good-news story; there are some caution lights at the margins—economic and political…
Corn costs to decrease
Rod Smith - Feedstuffs
There was dramatic drought in Argentina in 2011 and dramatic drought in the U.S. last year, and now, "there's almost no corn left," Dr. Paul Aho told poultry producers at the International Production & Processing Expo in Atlanta, Ga., Jan. 30.
Droughts are not really expected, he said, noting that there was a drought in only five of the last 42 years, counting last year and that the chances of back-to back droughts are 17% -- like rolling a "7" with dice.
Because of the lack of droughts, producers became accustomed to working down corn stocks, he said, pointing to a stocks:use rate in 1988-89 that was 25% and still was as high as 20% in the mid-2000s. However, the draw on corn for ethanol ravaged ending stocks in the second half of the decade, and the stocks:use ratio for 2012-13 is now only 6%, record low.
This (the combination of drought and low ending stocks) is why feed costs last year were the highest on record -- 80 cents/lb. for livestock and 45 cents for poultry, he said.
However, if it rains this spring and summer to produce a normal corn crop, feed costs could drop to 50 cents for livestock and 35 cents for poultry, he said...
Corn prices shrug off dire US ethanol data
21:36 UK, 30th Jan 2013, by Agrimoney.com
Corn prices shrugged off the worst US ethanol production data on record amid ideas that the decline in output of the biofuel may have reached a low, with prices also getting a boost from worsening South American weather.
US ethanol output slumped by 22,000 barrels a day to 770,000 barrels a day last week, the lowest figure since the Energy Information Administration began collecting data in 2010.
The decline follows a series of further capacity cuts by ethanol producers, with Valero on Tuesday saying it had idled three of its 10 plants in the last quarter of 2012, while Abengoa Bioenergy and Poet have over last week unveiled three temporary shutdowns between them.
On Tuesday, White Energy said that a Texas ethanol plant it shut on January 7 because of poor margins, squeezed by high corn prices, will remain closed until March, and potentially until the last quarter of 2013.
'Record period of losses'
As a further sign of a slack ethanol market, US stocks of the biofuel rose 2.3% last week to 20.54m barrels, taking gains in 2013 nearly to 700,000 barrels.
However, the market's outlook may be less dismal than it appears, with industry losses waning after what Linn Group analyst Jerrod Kitt termed " the longest period of negative profitability in the history of the ethanol industry".
Benson Quinn Commodities analyst Brian Henry said that while ethanol maintained a large discount to gasoline, of more than $0.50 a gallon, "prices have been rising, as have those of distillers' grains," an important byproduct of corn ethanol manufacture used as animal feed.
These dynamics are "seeing production margins improve, which should be expected as capacity is declining".
Paper vs physical
Mr Kitt said that ethanol plant profitability, as measured in Nebraska, had improved from the equivalent of $0.50 losses per bushel of corn close to breakeven, and producers "may be even a little bit profitable if they sell at the right opportunity".
The geography of ethanol manufacture is important, with plants close to main Corn Belt corn-growing states seen having an advantage in buying cheap raw material compared with sites in states, such as Texas, with small corn production, and competition with cattle ranchers for supplies of the grain.
Furthermore, it was getting more expensive for blenders to buy so-called Rins (renewable identification numbers), a paper proxy for ethanol, to meet targets for ethanol use, compared with using the physical biofuel itself.
Prices of Rins have soared to 33 cents a gallon, from 1 cent a gallon in mid-June, as buying compliance with the US mandate has become more attractive compared with physical blending.
"This has not yet fed through into the physical market, but we believe it will," Mr Kitt said, terming Rins supplies "undeniably tight", and comparing the cheapness of ethanol compared with gasoline to the high cost of Rins.
"When we look back in a few months time, I think we will identify around now as having been the bottom for ethanol production."
'Weather leans positive'
Corn prices also received support on Wednesday from a further deterioration in the South American weather outlook, where dryness in Argentina and southern Brazil is sparking concerns...
Will there be enough corn to last until the next harvest?
Posted by Stu Ellis on FarmGateBlog
Last week a Missouri ethanol refinery, operated by POET, announced it was suspending production because of the inability to find enough corn. Others may have taken the same action, but the reason may not have been as pronounced. There is no surprise about spot shortages of corn following the drought of 2012, and more will be identified as the marketing year progresses. In fact, the low yields of Central Illinois prevented sufficient supplies to larger ethanol plants, which have purchased trainloads of corn from higher yield areas in Minnesota and the Dakotas. In the southeastern US livestock producers have found their shortage is better supplied by offshore sources, such as Brazil, than try to obtain odd lots where possible in the US. As a result of the trend, questions are raised about the stress on the corn user as a result of the tightening availability of corn.
USDA’s January 11 report on the final production estimates for 2012, along with the December 1 quarterly grain stocks, give an indication of the significance of the shortage. Ending stocks are at record lows, corn imports are projected, and typical users are either going elsewhere for corn or seeking alternatives. That is the assessment of Bob Wisner, Iowa State University ag economist, who says despite the expectation for short supplies, prices have not begun to ration those short supplies yet. And he says that will have to happen between now and the end of August.
One of the largest users, the livestock industry, created some market confusion at the outset of the 2012 harvest when early harvested corn was fed prior to the end of the 2011 marketing year. That caused estimates to be revised and questioned for the 2011 and 2012 crops. Some of that was offset by reductions in projected estimates of exports, says Wisner. USDA has projected a higher than average volume of corn being fed during the first quarter of the year, due to increased livestock numbers, heavier market weights, and substantial marketings.
But at the same time feed alternatives are also in short supply, including corn from the 2012 second crop in Brazil and feed quality wheat from a variety of sources. Those may extend the ability of US corn to meet export demand. But Wisner is not convinced of that. He says the main alternative to the short US 2012 corn crop will be the 2013 second crop corn soon to be planted in Brazil. There is always the logistical challenge of getting it here, or anywhere for that matter.
With high use of domestic stocks in the first quarter of the year, there must be reduced feeding of stocks in subsequent quarters, but how much? Wisner says the 12% increase identified in the first quarter will have to be correlated with a feed reduction in the balance of the year. But he says that means there will have to be a larger reduction in livestock numbers than is now indicated. The only choice would be a reduction in cattle on feed, (and USDA just indicated January cattle on feed was only 96% of that from 2012.)
Rationing for the rest of the year
Wisner expresses concern about the need for rationing corn for feed throughout the balance of the marketing year.
Wisner notes that USDA statisticians reduced their estimate of corn exports to only 950 million bushels for the current marketing year in the January 11 supply-demand report, which would be the least in 40 years, and would mean a 36% cut from 2011. And he says if the estimate falls short of the 950 million, more corn would be available for domestic use.
To date, exports are about 50% below prior year levels, and the 539 million bushels exported by early January would put the year total at 749 million bushels if the pace was retained. With lower exports and more available for feed, Wisner’s feed use scenarios would not be as stressful. He says the need for rationing would not be negated, but the feed reductions would be more modest.
But will exports continue to languish? Wisner says reaching the USDA projection would only require 411 million more bushels to be exported between now and the end of August. Based on the past year’s export pace for the balance of the marketing year, the export pace would need to slow by nearly 16%.
US corn exporters have been facing stiff competition from feed wheat in several countries along with corn from the Ukraine, and second crop corn in Brazil that have been priced under the US corn market. Those supplies will not last, and many have already diminished to the point that foreign exporters have closed down. Southern Hemisphere feed wheat, just now being harvested, is down about 25% in yield in production, and the European Union is expected to be in the market buying substantially more feed grains than usual. However, the EU will not buy US corn to avoid biotech issues.
Wisner concludes by saying the short corn crop has already reduced ethanol and export use of US corn, but not feed use, despite higher prices. And he says without that, corn supplies could be tighter than already indicated. He will be watching for the next quarterly grain stocks report at the end of March, along with livestock inventory, and marketing weights to determine if the second quarter corn disappearance confirms any change in the trend from the first quarter.
He says export demand has been weak and if the global market wants Brazilian corn it will have to sort it out from all of the Brazilian soybeans headed to export terminals, which he perceives as an increased demand for US corn to be exported. The two issues that will have a bearing on demand—says Wisner—are the export price of alternative feeds and the potential for any shipping delays. While the latter is unknown, the former points to corn as a bargain:
$340 for Australian wheat
$340 for French wheat
$310 for US soft wheat
$305 for US corn
Corn stocks will be tight before the end of the current marketing year, causing spot shortages. US livestock feeding has been aggressive in light of short feed supplies, and unless there are cuts in the rate of feeding, livestock feeders will face critical decisions. Exports have been cut back due to high prices, but with the disappearance of alternative feed grains, US corn exports could resume by the end of the marketing year, putting more pressure on the supply.
The Big Lie
João Carlos Kopp - Farm Futures
Posted on January 30, 2013
Hello my friends, I've been watching a lot of comments on social media - Twitter - and receiving many questions so I felt I needed to write for my readers and try to uncover the truth.
As you know, last year South American suffered a lot with the drought (and you're probably tired of hearing about this), but a lot of people in the United States took time to believe this fact, but didn't believe other information coming out of Brazil about the rebound.
Well, this year, Brazil is running to produce a record 85 million metric ton crop of soybeans, and will become the No. 1 soybean producer in the world. But I suppose it's not that question that made a lot of people try to corner the market and offer up lies about the Brazilian and South American situation.
First, a lot of people won't want to believe in that record crop because we are just planting. You need to raise a crop to get one. Note that all climate models and current situations that we have in Brazil showed back in September and October that we will have a huge crop.
Second, with that news came the talk about our logistics problems and it's true that we have a lot of deficits in our transportation infrastructure, but we are boosting our export capacity. And the government has launched a program to keep enhancing that capacity.
These two rumors are not enough after prices fell from $17 to below $15 and people are still saying that weather conditions in Brazil will hurt. But USDA, CONAB (a Brazilian national company) me and other's have not stopped raising our soybean crop estimate for Brazil. And Argentina has remained almost unchanged. And the market did respond by dropping prices below $14.
Prices were falling with enormous pressure in the first week of 2013, with macro-economies, new tax regulation in the United States, and of course perfect growing conditions in South America.
The second week of January comes and all markets are waiting for that USDA report. The numbers come in on the bullish side, with huge demand and tight world stocks, especially in the U.S. And the Chinese dragon continues to be hungry, buying soybeans in the U.S. because Brazil will start to export large volumes the second week of February, and in this report USDA increased the Brazilian crop, and cut the Argentina crop a bit.
Now comes another rumor. Recently, talk on Twitter suggested that Brazil was OVERSOLD on February soybeans; and I will tell you we are not oversold! The last beans farmers sell in Brazil is the early seeds, because the be risk is concentrated here. It's a difficult crop to estimate, like U.S. double-crop acres.
A lot of people will say Brazil is oversold because they have a lot of vessels waiting in Brazil and they're empty. Well they are here, but that doesn't mean we're oversold, it's because the U.S. has few soybeans left to export, the Mississippi River has problems and it's cheaper waiting here trying to buy and load early than to stay somewhere else.
With this we hear yet another rumor, that it's raining too much in Mato Grosso and I'm telling you it's raining but it won't delay the harvest pace, create a big issue or big losses...
Brazil Braces for Grains Logistics Test
Record Soy Crop to Put Pressure on Overstretched Ports
Alastair Stewart South America Correspondent
DTN/The Progressive Farmer - Wed Jan 30, 2013 12:57 PM CST
SAO PAULO, Brazil (DTN) -- Brazil's soybean harvest has barely started and the ships are already lining up at ports.
As many as 126 vessels were scheduled to load 6.2 million metric tons (mmt) of soybeans and corn, according to Unimar Agenciamentos Maritimos Ltda., Bloomberg reported. That's well up from 72 ships carrying 2.8 mmt at the same time last year.
Brazil is set to produce a record soybean crop of as high as 85 mmt this season, up 27% on the year before. This jump is expected to put enormous pressure on Brazil's overstretched ports.
As a result, delays of 45 days and more are expected at the principle exit points of Santos and Paranagua.
In an attempt to get ahead of the crowd, global buyers are sending ships to port early, according to local trading desks.
But this strategy has been partially blunted by big line-ups for corn shipments in February, as exporters try to ship new-crop corn before the bulk of the soy arrives.
It's a very tight situation, and one that could deteriorate if rain comes to delay loading.
The port issue is only one part of the logistical challenge facing Brazil's grain industry this year.
The explosion of soybean production in the Cerrado, far from port, combined with a lack of river and rail transport options and a scarcity of trucks come harvest time, has caused Brazilian transport rates to jump over the last 120 years.
Haulage rates to port have jumped from $1.20 per bushel of soy in 2003-04 to $2.48 per bushel in 2011-12, according to Andre Pessoa, director of Agroconsult, a local farm consultancy. And a radical leap in rates is forecast for this season. Road freight rates will rise by 34% this season, predicts the Sao Paulo Shore Cargo Haulage Union.
The principle culprit is new legislation that limits truckers to 11-hour days and demands that they take a break for half an hour every four hours, but a 5.4% increase in the price of diesel will also play a part.
Last year, Abiove estimated that Brazil is short of approximately 50,000 truck drivers...
Future Profits? Think China
By: Ed Clark, Top Producer Business and Issues Editor
via AgWeb - January 30, 2013
During the next decade, a country some 7,000 miles away will have more to do with your profits than any other factor. Through 2020, demand from China is mostly a good-news story; there are some caution lights at the margins—economic and political.
The numbers are nothing short of phenomenal: 63% of U.S. soybean exports go to China, or more than one out of every four bushels produced. "During the last decade, Chinese imports have gone up so fast that the rest of the world has gone down," says John Baize of John C. Baize & Associates, an international agricultural trading and policy consulting firm. "China has outbid the rest of the world."
As late as 1995, China was a net exporter of soybeans. This year, USDA estimates exports to China of 63 million metric tons (MMT). "That will grow to 80 MMT by 2020 at the latest," Baize says. China’s demand for soybeans is growing at a rate of 2 to 3 MMT per year.
Is Corn Next? China has given up trying to be self-sufficient in soybeans, but that isn’t the case for corn and wheat—primarily for political reasons. However, corn could give China trouble and it might have to turn to the U.S. for more supplies unless it allows global seed companies to sell genetically modified seed to its farmers. China has been dragging its heels, but aside from boosting imports, there is no way it can obtain the increasing amounts of corn it needs for human, livestock and industrial needs, Baize explains.
Darrel Good, a University of Illinois ag economist, disagrees. "They have put significant effort into increasing production with hybrids and fertilizers," he says. "They also carry large reserves of corn." In individual years when China has a poor crop, it might import significant amounts of corn, but such imports will be inconsistent, Good says.
DDGs Fill Containers. China has become a major importer of dried distillers’ grains (DDGs), Good says, so much so that the Chinese government has accused the U.S. of dumping DDGs onto the world market. China largely imports DDGs so containerships that delivered manufactured goods to the U.S. don’t have to come back empty.
Baize does not see a slowdown in the increasing demand for corn and soybeans to fuel China’s plan to grow its livestock industry.
While Baize is bullish long-term on Chinese demand, the nation will have to work through two problems. First, it faces huge internal debt, some of which will never be repaid, as the loans funded projects that have little chance of success. Second, the nation must work through its political problems. "People are fed up with corruption and the abuse of power," Baize says. Last year, there were more than 200,000 protests.
Baize predicts economic growth of 7.5% to 8% this year, which is strong but not the double digits realized in much of the last decade.
Good does not expect the growth in soybean exports to China to continue at the torrid pace of the past 10 years—on the order of a four- to fivefold growth. However, he does not foresee exports to China declining, either. He believes more moderate growth will continue between now and 2023.
Baize and Good are not the only ones bullish on China...
DJ U.S. Corn Falls On Wetter Argentina Weather Forecast
Owen Fletcher - DJ/Agriculture.com - Jan 31, 2013
--U.S. corn futures trading down on wetter Argentina weather forecast
--Forecasters see greater possibility of rainfall in Argentina in 11- to 15-day period
--Weekly export sales for corn lackluster, but in line with expectations
CHICAGO--U.S. corn futures are trading lower Thursday morning on a wetter weather forecast for Argentina.
In electronic trading, Chicago Board of Trade futures for March delivery are down 2 3/4 cents, or 0.4%, at $7.37 1/2 a bushel.
Weather forecasts on Thursday had turned slightly wetter for the 11- to 15-day period in Argentina, stalling corn prices after they jumped on Wednesday due to concerns about dry weather in Argentina potentially damaging crops there.
Rainfall in the last day also exceeded expectations in parts of Argentina. Traders will watch to see the results of a rain system set to move through the country in the next two days.
The current forecast could still stress late-pollinating corn crops in up to one-third of Argentina's farm belt, or 10% to 15% less than projected a day earlier, Commodity Weather Group said in a forecast note.
Profit-taking also is weighing on corn as traders sell futures after Wednesday's price jump.
Traders also remain concerned about tepid corn demand from ethanol producers and foreign buyers.
U.S. ethanol production fell 2.8% to 770,000 barrels a day in the week through last Friday, the lowest weekly level since record-keeping began in mid-2010, data from the U.S. Energy Information Administration showed Wednesday.
The U.S. Department of Agriculture on Thursday reported net corn export sales of 253,300 metric tons in the week through Jan. 24, including 186,800 tons for delivery in the current marketing year. Analysts had expected net sales of 200,000 to 400,000 tons...
DJ Soybean Futures Ease on Argentina Weather Forecast
Andrew Johnson Jr. - DJ/Agriculture.com - Jan 31, 2013
--Market focused on improved rainfall outlooks for Argentina
--Traders shed risk until they sort out how much rain Argentina will get
--Market absorbing a shift to "new crop" buying by foreign importers
CHICAGO--U.S. soybean futures are trading lower Thursday, pressured by improved weather outlooks for Argentina, the world's third-largest soybean producer.
Chicago Board of Trade soybeans for March delivery recently were down 14 1/4 cents, or 1%, at $14.64 1/2 a bushel.
Soybean prices are falling as traders focus on improved rainfall outlooks for key soybean-growing areas of Argentina.
Improved rains after recent spates of dryness increase the chance that Argentina could produce the large production forecasts this year that government and private forecasters have projected. Farmers will harvest soy crops in South America in the next several months.
Futures have rallied 4% over the past month, amid concerns by analysts that dry conditions in Argentina may cut crop yield potential.
"The market is taking a breather from the recent run-up in prices," said Jason Britt, president of brokerage Central States Commodities in Kansas City, Mo. "It's just a little end-of-month profit taking, with traders shedding a little risk until we sort out how much rain Argentina will get."
The weather forecast for Argentina changed Thursday, as a high-pressure system that was to block moisture this weekend and next week failed to move over Argentina, private weather-forecaster World Weather Inc. in Kansas City said in a morning forecast.
Weather models are pointing to wetter conditions in Argentina late next week, with rain falling in many of the most important summer grain and oilseed production areas that have been driest recently, World Weather added in the forecast.
South American weather remains the focus of the market, as food processors and other soybean buyers are counting on Brazil, the world's second-largest producer after the U.S., and Argentina to harvest big crops in the next several months. That would relieve the strain of tight global supplies following last summer's severe U.S. drought.
Meanwhile, the U.S. Department of Agriculture reported net weekly export sales of 1.253 million metric tons in the week ended Jan. 24. The sales included 386,000 metric tons for delivery in the 2012-13 marketing year that began last Sept. 1, and sales of 867,000 metric tons for delivery in the 2013-14 marketing year that begins this Sept. 1. The sales were within traders' expectations for a sales range of 600,000 to 900,000 tons.
The report confirmed the continued shift to "new crop" buying by foreign importers, a sign that world traders are gaining more confidence that South America is close to alleviating the strain on tight global supplies. "New crop" supplies will be harvested in the U.S. this coming fall...
DJ U.S. Wheat Falls On Profit-Taking, Export Demand Concerns
Owen Fletcher - DJ/Agriculture.com - Jan 31, 2013
--U.S. wheat futures trading lower on profit-taking and pressure from corn and soybeans
--Concerns about tepid export demand also still weigh on wheat
--Southern Plains dry in next five days but has above-average chances of precipitation afterward
CHICAGO--U.S. wheat futures are trading lower Thursday morning on profit-taking and mixed signs of export demand.
In electronic trading, Chicago Board of Trade futures for March delivery are down 4 1/2 cents or 0.6% at $7.82 1/2 a bushel. Kansas City Board of Trade March wheat is down 3 1/4 cents or 0.4% at $8.37 1/2 a bushel. MGEX March wheat is down 3 1/4 cents or 0.4% at $8.65 3/4 a bushel.
Wheat futures rose on Wednesday in line with higher corn and soybean prices, as traders worried about dry weather in Argentina. But wheat on Thursday is following corn and soybeans lower, on profit-taking after Wednesday's gains and on a wetter forecast in Argentina.
Wheat is also pressured by continued concerns about tepid export demand. The U.S. Department of Agriculture on Thursday reported net wheat export sales of 387,900 metric tons in the week through Jan. 24, including 293,600 tons for delivery in the current marketing year. Analysts had expected net sales of 300,000 to 550,000 tons.
However, the Taiwan Flour Millers' Association Thursday purchased two cargoes of U.S. wheat totaling 78,670 metric tons from Hamburg-based Alfred C. Toepfer International GmbH, trading executives said. The association is buying wheat after a gap of six weeks, amid concerns that prices may rise due to prolonged drought affecting U.S. wheat crops.
Iraq has issued a new tender to buy at least 50,000 metric tons of wheat, the Iraqi trade ministry said Thursday. The tender closes on Feb. 17.
Traders are also continuing to monitor the weather for wheat in the U.S. southern Plains, where drought conditions threaten crops.
The National Weather Service's five-day forecast is dry for the southern Plains. But its six- to 10-day outlook predicts above-average chances of precipitation in central and eastern Kansas and Nebraska...
NASA's LandSat Satelite to Launch Again, Collect Important Data About Natural Resources
KTIC (NE) - Jan 30, 2013
NASA's Landsat Data Continuity Mission will launch on February 11th in a joint NASA and U.S. Geological Survey mission to add to the longest continuous data record of Earth's surface as viewed from space. NASA Earth Science Division in the Science Mission Directorate Michael Freilich says this will give the U.S. and the global research community a better understanding of the changes occurring on the planet. This data provides the U.S. with crucial data about its natural resources and help in many areas - including agriculture.