Sue Martin column: USDA baseline report only a preview
Corn USDA baseline figures were dismissed fairly quick when traders realized that data from the November supply and demand report was used. So, a bit out of touch. Regardless, the report was another bullish report. The report reflected an increas...
USDA baseline figures were dismissed fairly quick when traders realized that data from the November supply and demand report was used. So, a bit out of touch. Regardless, the report was another bullish report. The report reflected an increase in 2007 to '08 planted acreage of 7.4 million acres, in line with previous estimates of Informa. The report indicated another growth of 3 million acres in 2008 to '09 and steady there-
Production was based on trendline yields. Notable was that USDA used the old carry of 935 million bushels vs. current estimates of 752 million bushels. Corn used for ethanol production is forecast to increase sharply next year into 2009 to '10. I would assume that the tax incentives and tariffs would need to be extended to achieve the continued pace of demand for corn to be used in ethanol that is being forecast. If the incentive and tariffs are not extended, corn usage for ethanol could be 3.2 billion bushels next year and 3.7 billion into 2009 to '10. Exports decline into crop year of 2008 to '09.
The report did not indicate an early withdrawal on CRP acreage from the program. Bottomline, the baseline report is only a preview and USDA's outlook meetings March 1 and 2 in New York will be more insightful and up to date. Much can happen to change the forecasts as we go through this year into the 2008 to '09 crop year. I do not think the highs are in on corn, especially the May, July and December contracts.
SoybeansYes, soybeans have reached $8, but that is in the November Contract, and the old crop contracts still should push higher than $8, while the November contract could reach $8.39. While soybeans feel the need to compete for acres, the old crop is being pushed up on news of South American weather concerns as it enters harvest.
Meteorologists indicate that Asian rust is nearly 10 times worse than last year in Bolivia, Paraguay and the northern regions of Brazil because of ongoing rains. My contacts tell me that in the Sorisso area of Mato Grasso, beans coming out of the field are carrying a moisture content of 30 percent and higher. Yield and quality losses are being noted. Every day last week, news abounded about the poor harvest conditions and yield losses - a switch from all the record crop estimates. The rosy forecasts came from the "rain makes grain" mentality. Still, the crop will be a record, but not to the degree that Brazil should be very competitive against the U.S. In fact, soybeans adjusted in dollars still are cheaper in the world market than the values reached in 2005.
NOAA forecasts above-normal temperatures in the Upper Midwest in the March to May period, but with intermittent chances of above-normal or below-normal precipitation in the Midwest and Central Plains.
The baseline report estimated soybean acres to decline to
71 million acres this year (I think more) and to remain below
70 million acres for the next nine years. This is along with the weather in Brazil causing harvest delays and Asian rust causing some quality and production losses. So will further Brazilian crop estimates come as declines?
We are into the Chinese New Year holiday as well as a long weekend in the U.S. and carnival into Feb. 20 in Brazil. So, maybe some profit taking occurs. Wouldn't have to, but if so, I would view it as an opportunity.