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Grain report By Dr. Robert Wisner
Corn
Plan to boost sales to cover late winter and spring cash-flow needs on rallies in the next few weeks. Give first priority to sales of elevator-stored corn. For corn in good on-farm storage, watch bids for late spring delivery and consider some sales if the market offers a profitable storage opportunity. Also consider conservative sales of new-crop corn for harvest delivery that you will need to move next fall.
There is risk that corn futures prices will over-react this winter and encourage larger 2007 corn plantings than necessary. Whether that happens will depend on spring and summer weather, as well as the final size of South American corn crop. At press time, crop conditions looked good in most of Brazil and Argentina. The U.S. National Weather Service indicated that a strengthening El Niño weather pattern exists, although prospects for it to continue into spring and summer were uncertain. Most record U.S. corn yields have occurred in El Niño years.
Cumulative U.S. export sales through mid-December were 35 percent above a year earlier and sharply above the levels of 2 and 3 years ago. Season-to-date export shipments were 22 percent above the same period a year earlier. USDA projections for U.S. season-total corn exports look quite conservative, with a 2 percent increase over last season. Actual exports appear likely to be considerably higher.
As we went to press, a major private crop forecasting firm had just released its survey of 2007 farmer planting intentions. Its analysis showed a potential 9.4 percent increase in U.S. corn acres, with much but not all of the acres coming from a shift out of soybeans. That acreage and a repeat of the record 2004 U.S. average yield would likely produce a crop large enough to moderately weaken harvest prices from recent levels. There also is risk that exports may decline moderately.
Beans
Plan to boost old-crop sales on rallies in the next few weeks. Check out prices for spring and summer delivery. Bids at some locations at press time provided an incentive to sell farm-stored beans for later delivery. Also watch for updates on the South American crop. Brazil and Argentina together are a much bigger exporter of beans and meal than the United States. Their crop is smaller, but they use a lot less at home and have more to export. While crop conditions there look good as this is being written, prospects can change quickly into the first week of March. Most of the crop in these two countries should be harvested by late March or early April and will compete with U.S. exports through at least November. Plan to go slower on new-crop than on old-crop sales unless a strong rally occurs yet this winter.
The major private crop planting survey indicated U.S. soybean plantings may be down almost 7 percent from last year. That much decline in acreage would almost certainly begin to tighten soybean supplies next season, even with good yields. Any widespread weather problems would add upside price potential. Weather impacts would be strengthened by indications that more soybean acres probably will need to shift to corn again in 2008 and 2009. Ethanol plants under construction point to a continued expansion in corn for ethanol of around 32 to 40 percent annually in the next 2 years. USDA projects corn processing for ethanol this marketing year to be up 34 percent from last season.
Bean export sales have been stronger so far this season than a year earlier. Last season’s sales were held back by more widespread bird flu problems. Season-to-date export sales have been about 39 percent above a year earlier. USDA projects a 21 percent increase in marketing year exports. Its projections for China’s bean imports look a bit low.
Wheat
Look for continued sensitivity of both hard and soft wheat prices to winter wheat crop conditions in the United States and abroad. Because of lack of moisture, the crop was in less than ideal condition in the southern Great Plains going into winter. The most critical areas were Texas and Oklahoma, along with parts of Kansas. In the soft wheat areas which include the eastern Corn Belt, Missouri and parts of the Mid-South, a wet fall prevented farmers from planting all of their intended wheat.
Important foreign areas to watch include France, northern Italy, some east European countries, Russia and the Ukraine. These areas were short of moisture in the fall. Satellite imagery in December indicated conditions there were considerably less favorable than a year ago. These areas are major wheat growing regions. With world wheat stocks at historically low levels, any sign of problems such as lack of snow cover or precipitation could lead to at least short-term strength in hard and soft wheat prices.
High prices have cut severely into U.S. hard winter wheat export sales. Cumulative export sales through mid-December were 48 percent below a year earlier. Sales to almost all major destinations were down sharply. In contrast, export sales of soft red winter wheat were up 68 percent from a year earlier. Part of the wide differential in sales for different classes of wheat appears to be due to foreign users shifting to lower priced and lower qualities of wheat for cost reasons.
Along with corn and soybeans, wheat prices will be moderately sensitive to the USDA March 30 planting intentions report and price relationships with other crops. A stronger wheat market than for row crops in March and April would encourage farmers in the Dakotas and Minnesota to shift some land from corn and soybeans to spring wheat.
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