Crop reports in the booksWhile most of the focus was on the USDA’s January reports this past week, there was other news that deserves attention.
While most of the focus was on the USDA’s January reports this past week, there was other news that deserves attention.
Jan. 12, the FrenchAgriMer increased its estimate of soft wheat exports outside of the European Union to a record 11.8 million metric tons, 2 million metric tons more than last year.
FrenchAgriMer also cut projected ending stocks by nearly 40 percent from last year. For the first five months this year, French shipments to Egypt soared 52 percent to 1.5 metric tons. Algeria shipments are up by 60 percent to 1.7 metric tons and exports to Morocco quadrupled to 982,000 metric tons.
The pace of exports has sent Paris wheat futures to extreme highs, while domestic end users have started to look elsewhere for substitutes from overseas. Feeders are said to be sourcing U.S. sorghum and Ukraine origin corn as well as feed wheat from European Union neighbors.
The Argentine corn and soybean production estimates were reduced because of ongoing drought conditions, which have plagued crops there. Corn has reached 60 percent pollination. Nearly 30 percent of soybeans are at flowering stage. Soybean yield losses should start to be realized soon unless rains start.
The soybean market
Soybean values are reaching levels that ordinarily would alienate buyers but there is not much available in the way of alternatives. It is interesting USDA did not increase exports of soybeans in its supply and demand report. That’s hard to understand when export sales stand at 83 percent of the current year USDA forecast for total exports. The five-year average is 69 percent of the USDA estimate at this time. If the Dec. 1 stocks number is accurate at 2.277 billion bushels, and the carry-out is 140 million bushels, then I suspect the soybean market soon will try to ration demand with more price appreciation.
In 14 of the last 15 years, USDA has estimated stocks too high in its January report. Some analysts in the industry think 2010 to ’11 stocks still are lower — say 80 million to 100 million bushels.
Also note USDA estimates all wheat acres were well above last year. But that wouldn’t be tough to achieve, since 2009 to ’10 acreage was the lowest in 100 years.
Currently, concern for the U.S. crop is the condition and how the weather treats the crop in the ground. Furthermore, we won’t know how much wheat acreage will be abandoned and planted to either corn or soybeans.
Of late, temperatures in some places have turned mild, melting protective snow cover. Weather forecasts indicate a return to bitterly cold temperatures later in January.
While wheat should be lagging for now, that trend may be a long way from being over, and higher prices are needed to ration both corn and soybeans.