Corn outlook and Brazil's mad cow case hit the markets

Reports of an expected increase in corn acres in the United States led the discussion Friday, Feb. 24, during the Agweek Market Wrap with Randy Koenen of the Red River Farm Network and Randy Martinson of Martinson Ag Risk Management.

That discussion came out of the USDA Ag Outlook Forum on Thursday, Feb. 23. Martinson said it's important to note that while this report is often very accurate on the demand side of the equation, the production side can be more difficult to nail down.

Martinson brought up the surprise of the outlook is that there is not an expected rise in soybean acres, despite there being an aggressive field of soy crush plants set to come on board that will need more soybeans. Wheat acres also showed an expected increase in acres.

The new data coming out of the Forum did little to assist the markets as they saw double digit losses in some areas to end the week, according to Koenen.

“It seemed like as soon as the Ag Outlook Forum released its numbers somebody pulled the plug on the drain and you just sort of see everything wash away for the week,” Martinson said.

The Forum also showed record yields expected for corn and soybeans. That was a bit of a surprise considering a large portion of the corn belt remains in at least some form of drought.

Courtesy U.S. Drought Monitor

“Of course up here in the northern Plains we’ve got a carbon copy started of last year, right now. You know, let’s hope that our spring doesn’t go like last year,” Martinson said.

Martinson said wheat had a bad week in the markets. Markets should have a better idea of the upcoming wheat crop as the southern states will soon be reporting weekly on their progress.

This talk of U.S. forecasts overshadowed what has been the main topic for the last month, which is South American weather. Koenen noted that news on their weather was pretty light Friday.

Martinson agreed and said that it’s pretty much the same story down there. There is hope that planting will take place in Brazil next week in a short window between forecasted rains. Estimates are that 50 percent of that corn crop is going in the ground outside of the optimal planting time frame.

“So that’s going to lead to some concerns,” Martinson said.

Martinson said the live cattle markets continue to trade at contract highs. A lot of strength is coming from a mad cow disease case in Brazil . That’s put a stop on beef exports to China.

“But we kind of drifted off towards the end of the week because we have the Cattle on Feed report coming out and the expectation is it will be friendly to cattle," Martinson said.

Martinson said he wouldn't be surprised to see some profit taking in the cattle market. He knows that stocks remain tight and supplies will continue to dwindle. The trouble is the economy is not moving in the right direction.

“I think we saw some negative economy news items come out on Friday that kind of stymied the cattle markets too, so you can tell that they’ve got one eye towards what’s going to happen in the economy and what the Feds going to do on their interest rate.”

Martinson is hearing that it could lead to another half-point interest rate increase towards the middle of March.

(The Agweek Market Wrap is sponsored by Gateway Building Systems.)