Marketing

Grain Outlook USDA forecasts corn export decline

The following marketing analysis is for the week ending Jan. 14.

CORN — Corn got off to a weak start on an improved last half January weather outlook for South America and as traders positioned themselves ahead of the menu of Jan. 12 U.S. Department of Agriculture reports. The reports didn’t hold any big surprises for corn and March corn failed to close above $6.00 per bushel in post-report trading. Attention refocused on South American weather which was showing better chances for rain for the last half of January. Corn prices retreated to their lowest level since Jan. 3. They managed to close above the 50-day moving average support at $5.88, but below $6.00 per bushel resistance. PHYLLIS NYSTROM CHS Hedging inC. St. Paul

Dec. 1 stocks were 11.647 billion bushels compared to 11.602 billion estimated and 11.294 billion a year ago. On-farm stocks as of Dec. 1 were up 3 percent from last year at 7.23 billion bushels. Off-farm stocks of 4.41 billion bushels were up 4 percent from 2020.

World ending stocks were neutral at 303.1 million metric tons vs. 304.1 mmt estimated and 305.5 mmt last month, but much larger than last year’s 292.2 mmt. Brazil’s corn production was chopped 3 mmt to 115 mmt vs. 116.2 mmt estimated. It is extremely early to draw hard conclusions about Brazil’s corn crop since 70 percent of their corn production comes from the safrinha corn crop — which gets planted after the soybean harvest. For comparison, Brazil’s safrinha corn yields last year were near 80 bu./acre, the first corn crop around 90 bu./acre, and Argentina’s corn around 120 bu./acre.

Argentina’s corn production was reduced by .5 mmt to 54 mmt and 53.6 mmt estimated. The Rosario Grain Exchange in Argentina is forecasting their corn crop at 48 mmt and the Buenos Aires Grain Exchange is at 57 mmt — very different outlooks. Conab’s Brazilian corn estimate is 112.9 mmt.

China reduced its corn demand for 2021-22 by 3 mmt to 287.7 mmt, which is still up 5.5 mmt from last year. They kept its 2021-22 corn import projection at 20 mmt. The USDA left its forecast at 26 mmt on the January report.

The weekly ethanol report was bearish with production down 42,000 barrels per day at 1.01 million bpd. This was the largest weekly drop in the last 30

Cash Grain Markets

corn/change* soybeans/change*

Stewartville $5.75 +.01 $13.27 -.08 Edgerton $5.88 -.12 $13.01 -.39 Jackson $5.94 -.10 $12.97 -.49 Hope $5.73 -.10 $12.88 -.49 Cannon Falls $5.78 -.09 $13.38 -.23 Sleepy Eye $5.89 -.09 $13.15 -.40 Average: $5.83 $13.11 Year Ago Average: $4.84 $13.19

Grain prices are effective cash close on Jan. 18. *Cash grain price change represents a two-week period.

weeks and the lowest production in 14 weeks. Ethanol stocks were up 1.55 million barrels at 22.9 million barrels. This was the largest single-week increase in 93 weeks! Margins crumbled 25 cents to 7 cents per gallon.

Weekly export sales were below the lowest estimate at 18 million bushels. Total export commitments at 1.6 billion bushels are down 9 percent from last year. The USDA is forecasting a 12 percent decline in yearon-year exports. China has 385.8 million bushels of unshipped corn sales left on the books compared with 236.2 million bushels last year on this date.

In other news, supply chain issues are cropping up again with 10 percent of dockworkers at Los Angeles ports are out due to Covid-related issues. Beginning Jan. 22, foreign truck drivers entering the United States will have to show proof of inoculation to enter the country which may further snarl issues. Increasing cases of Covid in port cities in China are slowing the moving of goods. The Climate Prediction Center gives La Niña a 67 percent chance of continuing into the Northern Hemisphere this spring. Talk about this spring’s planted acres will gain traction with high fertilizer prices (with significant deterioration noted this week) and high commodity prices.

Outlook: March corn continues to trend sideways from $5.85 to $6.10 per bushel. December corn is testing the upper end of its $5.40 to $5.60 trading range with the contract high at $5.65 per bushel within reach. Fertilizer prices have been receding, and with the uncertainty surrounding Brazil’s safrinha corn crop, the December corn contract may garner as much attention as old crop months.

In addition, soft red winter wheat acres are projected to increase to 7.07 million acres compared to 6.648 million in 2021 which may cut into 2022 corn acres. South American weather forecasts will cast a long shadow over the direction of both corn and soybean prices for the time being until something changes significantly to push prices out of their ranges.

For the week, March corn dropped 10.5 cents to $5.96.25, July corn gave back all the previous week’s gains to close 11 cents lower at $5.93.5, and the December corn gained a half-cent to settle at $5.58.25 per bushel.

SOYBEANS — Soybeans retraced about half of the previous week’s gains when traders returned from the weekend as South American forecasts were more optimistic for rain in the next two weeks. Hot temperatures in Argentina during the week raised speculation about the prospects for irreversible damage. The Jan. 12 crop reports were supportive, but overall, generally mild.

The USDA surprised us by slashing Brazil’s soybean crop 5 mmt to 139 mmt vs. estimates for 141.6 mmt and last month’s 144 mmt forecast. Argentina’s soybean crop was cut 3 mmt to 46.5 mmt compared to 48.1 mmt expected. Both Brazil’s and Argentina’s corn and soybean crops are still bigger than last year.

World ending stocks were bullish at 95.2 mmt compared to 99.9 estimated and 102 mmt in December. Last year’s global ending stocks were 99.9 mmt.

The two grain exchanges in Argentina have very different crop estimates. The Rosario Grain Exchange has Argentina’s bean crop at 40 mmt and the BAGE is carrying it at 44 mmt. AgroConsult cut their Brazilian soybean outlook 5 mmt to 134.2 mmt. Conab’s Brazilian soybean estimate is 140.5 mmt and Safras and Mercado is using 132.3 mmt. China announced they plan to increase their soybean crop by 40 percent by 2025. Their current production is 16.4 mmt and they propose an increase to 23 mmt.

On the U.S. balance sheet, the yield was increased by .2 bu./acre to the second-highest ever at 51.4 bu./ acre. Record yields were noted in Iowa, Wisconsin, and Ohio, plus various other states. Production was a record 4.435 billion bushels, very close to the average trade guess and 10 million bushels higher than last month. There were no changes to exports or crush. Ending stocks were 10 million bushels higher than last month at 350 million bushels and close to the 348 million bushel estimate. The stocks-to-use ratio was little changed at 8 percent, but the average farm price was increased 50 cents to $12.60 per bushel.

Low water levels on the Parana River in Argentina continue to plague shipping logistics. The Parana River carries approximately 80 percent of Argentina’s farm exports.

U.S. weekly export sales were 27 million bushels and within expectations. Total commitments are 1.56 billion bushels and 23 percent behind a year ago. The USDA is predicting year-on-year exports to be down 9.5 percent.

Outlook: March soybeans failed to close above $14.00 per bushel in post-World Agriculture Supply and Demand Estimates trading as South American weather forecasts for the last half of January were leaning more favorable for crop development. Export demand is disappointing, but crushers continue to have positive margins. Headlines will center on crop

See NYSTROM, pg. 17

MIELKE, from pg. 12

Lastly, the latest Covid surge has been particularly disruptive to all kinds of manufacturing plants, according to Gould, with employees calling in sick. Often entire shifts or a big part of a shift is not able to show up because of outbreaks, with some plants not even able to run due to the lack of employees.

StoneX Jan. 12 “Early Morning Update” echoed the sentiment. “The trend for dairy is up. But the takeaway from conversations around dairy products and prices is summed up in one word: chaos. And this isn’t just for dairy. Supply chains are chaotic.”

Store shelves are spotty, some well-stocked, others not. There are reports of better milk supply in some sheds and milk is starting to be offered under class, but there has reportedly been aggressive dumping of millions of pounds of milk in the Pacific Northwest due to weather, trucking and labor issues.

The National Milk Producers Federation concurs with the optimism. NMPF chief economist Peter Vitaliano encouraged farmers to sign up for the Dairy Margin Coverage program, which has a deadline of Feb. 18 for 2022 assistance. “The futures markets look very good at the moment,” he concluded, “but there are many months to go. The history of dairy farmers second-guessing the markets — even based on the futures — is not very good. ” n

In politics, Agriculture Secretary Tom Vilsack announced an adjustment in school meal reimbursements to “help schools continue to serve children healthy and nutritious meals,” according to a USDA press release. The move puts an estimated $750 million more into school meal programs across the nation this year, “making sure federal reimbursements keep pace with food and operational costs, while ensuring children continue to receive healthy meals at school.”

Last of all. U.S. milk production is mixed between and within regions, according to the USDA’s weekly update. Class I demand is increasing as winter breaks come to an end. Spot milk availability is varied. Where available, cheesemakers are acquiring milk at from $4 under Class to $1 under.

Looking down under, a wet spring in Australia has helped with feed growth, according to Dairy Market News, but more recent heavy rain has complicated harvesting feed. Higher costs for fertilizer cause some concern for profitability. Farm labor shortages persist. Cow milk yields are noted to be adversely affected by wet and cold weather. Milk output was down 2.4 percent through November from 2020.

New Zealand output was down 2.9 percent. Fonterra increased its milk pay price to a record level, according to Dairy Market News, due to strong demand for milk. It also lowered its 2021-22 milk production forecast 1.6 percent due to “varied weather and challenging growing conditions.”

Lee Mielke is a syndicated columnist who resides in Everson, Wash. His weekly column is featured in newspapers across the country and he may be reached at lkmielke@juno.com. v

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