Archive for January, 2013

Wednesday, January 23, 2013 @ 02:01 PM
posted by Administrator

JANUARY 23, 2013

By Darrel Good, University of Illinois
Courtesy of farmdocdaily
The drought-reduced U.S. corn crop of 2012 suggested that corn prices might behave in a pattern generally described as “short crops have long tails.” The phrase depicts the expectation of rapidly rising prices that peak near harvest time, decline in an unspecified pattern over the next several months, and return to pre-drought levels as early as the following marketing year. The decline in prices is expected as a result of a slowdown in consumption and a return to normal production.
Corn prices this year have generally followed the expected short-crop pattern as the expected consumption and supply responses continue to unfold. The pace of consumption of U.S. corn so far in the 2012-13 marketing year has been slower than that of last year. However, the slowdown has been modest and has come primarily in the export market and in the production of ethanol rather than in the domestic feed market as earlier expected. The rapid pace of domestic feed and residual use of corn revealed on Jan. 11 breathed some life back into old crop corn prices even though the pace of exports and domestic processing remain low. In addition to a slowdown in consumption of U.S. corn, the USDA projects another large corn harvest in Brazil in 2013 and a rebound in production in Argentina following the drought reduced harvest of 2012. While likely large, the size of those crops is yet to be determined and recent dryness in some areas has raised some yield concerns.
Some of the elements that contribute to the price decline following a short crop are clearly occurring. The final element, and likely the most important element, of the expected price decline is the size of the 2013 corn crop. The question is whether production will fully rebound from the extremely low level of 2012 as it has following other droughts over the past 50 years. Production prospects begin with expectations for planted acreage. Planted acreage totaled 97.15 million acres in 2012, 5.219 million more than planted in 2011 and 3.628 million more than the recent peak in 2007. For the most part, analysts are reporting expectations of even larger acreage in 2013. Those expectations appear to be near 99 million acres. The increase would come from an overall increase in row crop acreage as some land has come out of the Conservation Reserve Program and from reductions in the acreage of less competitive crops.
Planted acreage of 99 million would point to acreage harvested for grain near 91.5 million acres under non-drought conditions. That would be an increase of just over four million acres from acreage harvested in 2012 when more than the usual amount of acreage was harvested for silage and abandoned. Such acreage would point to prospects for an extremely large crop in 2013. Early season acreage expectations, however, are often not a good forecast of actual acreage. Last year, for example, The USDA’s March Prospective Plantings report indicated intentions to plant 95.864 million acres of corn, nearly 1.4 million more than the average trade guess. Actual planted acreage exceeded early expectations by the trade by nearly 2.7 million acres.
The other consideration in forming production expectations is obviously expectations for the U.S. average yield. Most base their early yield expectations on an analysis of trend yield. Trend yield analysis, however, is not straight-forward. First, average yields over any time period reflect both changing technology and variations in weather conditions. A calculation of the true technological trend in average yields requires that yield observations be “corrected” for annual variations in weather conditions. Such correction requires the application of models that separately account for the yield impact of technology and weather. A failure to do so can result in a biased estimate of trend. Following three consecutive years of low corn yields, a trend calculation that does not adjust for variations in weather conditions will understate trend yield for 2013. A second issue surrounding trend yield calculations is the length of the time period used to calculate the trend. Different periods result in different trend calculations. We continue to think that 1960 through 2012 is the correct time period for calculating the 2013 trend yield.
A second consideration for some in forming early yield expectations is the state of soil moisture going into the planting season. However, as learned again last year, the yield implications of those conditions are dwarfed by the impact of growing season weather. While current drought conditions are of concern, those conditions alone do not provide much information about 2013 yield prospects.
While prices for the 2013 corn crop are currently about $0.70 below the peak reached in September 2012, they are well above the level that would be expected if the 2013 crop reached its full potential. Next month, the USDA will release projections for the U.S. farm sector for the next 10 years. There will be a lot of interest in the 2013 corn acreage and yield projections contained in that report.

Monday, January 21, 2013 @ 08:01 AM
posted by Administrator

JANUARY 19, 2013
By: Nate Birt, Farm Journal Social Media and News Editor

Corn and wheat enjoyed favorable market conditions this week as they continued riding on the Jan. 11 USDA reports, says Jerry Gulke, president of the Gulke Group.
“What we can say is the report was bullish, and it extended,” Gulke says. “In other words, not just for a week, but now we’re extending the second week. And going into a three-day weekend, you would think this thing would set back more than it did. Sometimes you lose half of what you gained … . I think the market’s still concerned, in the grains at least, how are we going to curb demand and can we do it enough?”
Meanwhile, new numbers from Informa Economics show an increase in planted acres for corn.
“I think we have to remember that Informa does this stuff using some economic model,” Gulke says. “They compare cost or return on investment or what’s the growth in beans versus corn, and the net profit, and as those fluctuate they have a tendency to change their acres. The USDA does the same thing.”
The decision by Cargill to close a cattle processing plant in Texas had repercussions this week, as well.
“The cattle market and feeder cattle market does not look good,” Gulke says. “It is a bad situation that says that if you buy feeder cattle here and you’re going to pay more for corn, you’re not going to make any money. And I think this week we lost about $40 worth of potential profit in live cattle … . So if it was bad, it got worse this week, and that’s what we’re trying to digest.”

Monday, January 14, 2013 @ 09:01 AM
posted by Administrator

Friday’s USDA reports injected some excitement into the markets. Jerry Gulke provides analysis.
Historically, the reports USDA releases around Jan. 12 are major market movers, and this year’s were no disappointment.
Yesterday, USDA released its Annual Crop Production, monthly Crop Production, Grain Stocks, Winter Wheat Seedings and World Agricultural Supply and Demand Estimates reports.
USDA estimates the total 2012 corn crop to be 10.780 billion bushels. In 20122, the corn crop was 12.358 billion bushels. USDA’s national average corn yield came in at 123.4 bu. per acre, compared to 122.3 bu. per acre estimate in November. Corn harvested acres were estimated down 346,000 from November, which was more than offset by the increase in yield.
Jerry Gulke, president of the Gulke Group, says the information released in the reports should provide some support for the corn market. “USDA lowered harvested acres and increased production. But, the kicker was we dropped carryover. We produced more, but will have less left over going into next year.”
USDA increased corn feed and residual use 300 million bushels from December, to 4.45 billion bushels. Gulke says this increase could be credited to livestock producers locking in feed prices early in 2012. “Maybe they loaded up when they saw the dry weather coming earlier this year.”
Gulke says the updates USDA provided on Friday should lead to some exciting times in the corn markets. “I don’t know how high it will go,” he says. “What I do know, when you’re given a financial report like this, corn shouldn’t close below today’s lows going forward.
For soybeans, USDA increased 2012 production to 3.015 billion bushels, up 44 million bushels from the November estimate. It pegged the national average bean yield at 39.6, up 0.3 bu. from the November estimate.
Gulke says the bean market was down hard, following the reports. “Really, there is no good or bad news in beans. Now we’ll start to focus on Brazil production.”
As for wheat, USDA estimates 41.8 million acres of all wheat has been seeded, which is up 1% from 2012. Gulke says the trade was expecting to see a much higher amount of wheat in the ground, which could have some looming implications.
“We’ve got a crop that not only went into dormancy in poorer condition than you wanted to see, but you also have less acres than expected. That would imply the guys in wheat country are going to plant more corn or beans.”

Friday, January 4, 2013 @ 03:01 PM
posted by Administrator

Click 2013 Agenda TFGA to view.