Feed Grain Market Outlook
Feed Grain Market Outlook
February 27, 2012 Volume 21, Number 11
Market Situation In Today’s Newsletter Market Situation Outlook Forum
1
Battle for Acres
2
Outside Markets
3
Marketing Strategies 2012 Corn Marketing Plan 4
Outlook Forum. At the Agricultural Outlook Forum in Washington DC last week, USDA released its 2012 supply and demand projections for wheat, corn, rice, and soybeans. Corn acres are projected at 94.0 million with 87 million harvested. This would be the highest corn acreage number since 1944 and with a yield estimate of 164 bushels, the largest corn crop on record. USDA notes that these projections assume normal weather for spring planting and summer crop development. Of the use categories, feed increases back to 2009/2010 levels, ethanol and other industrial uses shows a slight decline, and exports increase 200 million bushels. The projected carryover of 1.6 billion bushels is twice the current estimate (801 million) and pushes the stocks to use ratio back up to 12%. The price implication of this increase in corn supply is a national average farm price of $5.00/bushel.
09/10 Planted Acreage (Mil. Acs.) Harvested Acreage (Mil. Acs.) Yield (Bushels) Supply
86.4 79.5 164.7
10/11 88.2 81.4 152.8
11/12e
12/13p
91.9 84.0 147.2
94.0 87.0 164.0
- - - Million Bushels - - 1,673 13,092 8
1,708 12,447 28
1,128 12,358 20
801 14,270 15
14,774
14,182
13,506
15,086
5,125 5,961 1,980
4,793 6,428 1,835
4,600 6,405 1,700
5,200 6,370 1,900
13,066
13,055
12,705
13,470
1,708
1,128
801
1,616
Carryover/Use (%)
13.1
8.6
6.3
12.0
Average Farm Price ($/Bu.)
3.55
5.18
6.20
5.00
Beginning Stocks Production Imports Total Supply Disappearance Feed and Residual Food, Seed & Industrial Exports Total Use Ending Stocks
1
Feed Grain Market Outlook
February 27, 2012 Volume 21, Number 11
U.S. Corn Supply and Demand Mil bu
16,000
50%
14,000
40%
12,000 10,000 8,000 6,000
30% 19.8%
17.5% 11.6%
4,000
12.8%
13.9%
20% 13.1%
12.0% 8.6%
6.3%
2,000 0
10% 0%
Ending Stocks Domestic Use and Exports
Production Stocks:Use
Source: USDA Agricultural Outlook Forum, February 24, 2012
Battle for Acres. The Planting Intentions report on March 31st will be the next official confirmation of USDA’s projected jump in corn acres. Recent movement in the soybean to corn price ratio might erode that estimate. With net returns of beans and corn equated in many Corn Belt budgets at a ratio of 2.5 (November beans divided by December corn), the movement of this price ratio closer to the benchmark might limit corn’s area gains.
2012 Soybean:Corn Price Ratio (Nov Beans:Dec Corn, weekly average closing prices) 3.0 2.9 2.8 2.7 2.6
Plant Soybeans
2.5 2.4 2.3
Plant Corn
2.2 2.1 2.0
2
Feed Grain Market Outlook
February 27, 2012 Volume 21, Number 11
Outside Markets. Germany’s parliament voted to approve a second bailout for Greece today, a critical measure of support from the Eurozone’s largest economy. At the G20 Summit in Mexico, finance ministers from developed and developing countries called on Europe to make additional financial commitments to prop up its members before asking the International Monetary Fund to do so. Oil prices pushed higher last week in response to supply concerns and tension in the Middle East, but supplies are increasing from Saudi Arabia and Nigeria. There is speculation that some oil may be released from the U.S. strategic oil reserve to offset lost Iranian exports and lower prices.
Dollar
Copper
Crude Oil
Ethanol
3
Feed Grain Market Outlook
February 27, 2012 Volume 21, Number 11
Tuesday February 21 12,965.69
Monday February 27 12,981.51
Net Change 15.82
Percentage Change 0.12%
3,333.30
3,294.54
-38.76
-1.16%
May ‘12 Crude Oil
106.75
108.54
1.79
1.68%
Mar ‘12 Copper
3.8365
3.8590
0.0225
0.59%
Mar ‘12 Dollar Index
79.136
78.570
-0.566
-0.72%
Mar ‘12 Corn
6.2950
6.4450
0.1500
2.38%
Dec ’12 Corn
5.6375
5.5700
-0.0675
-1.20%
Dec ‘13 Corn
5.5025
5.5000
-0.0025
-0.05%
Dow Jones Ind. Avg. FTSEurofirst 80
Marketing Strategies 2012 Corn Marketing Plan. Corn broke out of its recent wedge pattern to the downside. In addition I received a sales signal from the moving average indicator: closing price < the 4-day moving average < 9-day moving average < 18-day moving average. This occurred on February 21st with a closing price of $5.63¾. I priced 20% of 2012 production on this move.
4
Feed Grain Market Outlook
February 27, 2012 Volume 21, Number 11
December Corn Futures and 2012 Marketing Plan ¢/bu
750
700
20% South American crop conditions Battle for Acres Planting Intentions
20%
20%
20%
20%
Early season Acreage Report/ crop Grain condition and Stocks weather outlook
Tassel and August Crop Report
Cash sales at harvest
650
600
550
500
Sold 20% at $5.63¾
11/1/2011 11/10/2011 11/21/2011 12/1/2011 12/12/2011 12/21/2011 1/3/2012 1/12/2012 1/24/2012 2/2/2012 2/13/2012 2/23/2012 3/3/2012 3/10/2012 3/17/2012 3/24/2012 3/31/2012 4/7/2012 4/14/2012 4/21/2012 4/28/2012 5/5/2012 5/12/2012 5/19/2012 5/26/2012 6/2/2012 6/9/2012 6/16/2012 6/23/2012 6/30/2012 7/7/2012 7/14/2012 7/21/2012 7/28/2012 8/4/2012 8/11/2012 8/18/2012 8/25/2012 9/1/2012 9/8/2012 9/15/2012 9/22/2012 9/29/2012 10/6/2012 10/13/2012 10/20/2012 10/27/2012 11/3/2012 11/10/2012 11/17/2012 11/24/2012 12/1/2012 12/8/2012 12/15/2012
450
Mark Welch Texas AgriLife Extension Economist 600 John Kimbrough Blvd Suite 335 College Station, Texas 77843 Tel. (979)845-8011 Fax. (979)845-4906
[email protected]
The opinions and recommendations expressed are solely those of the author and are intended for educational purposes only as part of the Texas AgriLife Extension Service. The author and Texas AgriLife Extension Service assume no liability for the use of this newsletter. Educational programs of the Texas AgriLife Extension Service are open to all people without regard to race, color, sex, disability, religion, age, or national origin. The Texas A&M University System, U.S. Department of Agriculture, and the County Commissioners Courts of Texas Cooperating
5
February 27, 2012 Volume 21, Number 11
Market Situation In Today’s Newsletter Market Situation Outlook Forum
1
Battle for Acres
2
Outside Markets
3
Marketing Strategies 2012 Corn Marketing Plan 4
Outlook Forum. At the Agricultural Outlook Forum in Washington DC last week, USDA released its 2012 supply and demand projections for wheat, corn, rice, and soybeans. Corn acres are projected at 94.0 million with 87 million harvested. This would be the highest corn acreage number since 1944 and with a yield estimate of 164 bushels, the largest corn crop on record. USDA notes that these projections assume normal weather for spring planting and summer crop development. Of the use categories, feed increases back to 2009/2010 levels, ethanol and other industrial uses shows a slight decline, and exports increase 200 million bushels. The projected carryover of 1.6 billion bushels is twice the current estimate (801 million) and pushes the stocks to use ratio back up to 12%. The price implication of this increase in corn supply is a national average farm price of $5.00/bushel.
09/10 Planted Acreage (Mil. Acs.) Harvested Acreage (Mil. Acs.) Yield (Bushels) Supply
86.4 79.5 164.7
10/11 88.2 81.4 152.8
11/12e
12/13p
91.9 84.0 147.2
94.0 87.0 164.0
- - - Million Bushels - - 1,673 13,092 8
1,708 12,447 28
1,128 12,358 20
801 14,270 15
14,774
14,182
13,506
15,086
5,125 5,961 1,980
4,793 6,428 1,835
4,600 6,405 1,700
5,200 6,370 1,900
13,066
13,055
12,705
13,470
1,708
1,128
801
1,616
Carryover/Use (%)
13.1
8.6
6.3
12.0
Average Farm Price ($/Bu.)
3.55
5.18
6.20
5.00
Beginning Stocks Production Imports Total Supply Disappearance Feed and Residual Food, Seed & Industrial Exports Total Use Ending Stocks
1
Feed Grain Market Outlook
February 27, 2012 Volume 21, Number 11
U.S. Corn Supply and Demand Mil bu
16,000
50%
14,000
40%
12,000 10,000 8,000 6,000
30% 19.8%
17.5% 11.6%
4,000
12.8%
13.9%
20% 13.1%
12.0% 8.6%
6.3%
2,000 0
10% 0%
Ending Stocks Domestic Use and Exports
Production Stocks:Use
Source: USDA Agricultural Outlook Forum, February 24, 2012
Battle for Acres. The Planting Intentions report on March 31st will be the next official confirmation of USDA’s projected jump in corn acres. Recent movement in the soybean to corn price ratio might erode that estimate. With net returns of beans and corn equated in many Corn Belt budgets at a ratio of 2.5 (November beans divided by December corn), the movement of this price ratio closer to the benchmark might limit corn’s area gains.
2012 Soybean:Corn Price Ratio (Nov Beans:Dec Corn, weekly average closing prices) 3.0 2.9 2.8 2.7 2.6
Plant Soybeans
2.5 2.4 2.3
Plant Corn
2.2 2.1 2.0
2
Feed Grain Market Outlook
February 27, 2012 Volume 21, Number 11
Outside Markets. Germany’s parliament voted to approve a second bailout for Greece today, a critical measure of support from the Eurozone’s largest economy. At the G20 Summit in Mexico, finance ministers from developed and developing countries called on Europe to make additional financial commitments to prop up its members before asking the International Monetary Fund to do so. Oil prices pushed higher last week in response to supply concerns and tension in the Middle East, but supplies are increasing from Saudi Arabia and Nigeria. There is speculation that some oil may be released from the U.S. strategic oil reserve to offset lost Iranian exports and lower prices.
Dollar
Copper
Crude Oil
Ethanol
3
Feed Grain Market Outlook
February 27, 2012 Volume 21, Number 11
Tuesday February 21 12,965.69
Monday February 27 12,981.51
Net Change 15.82
Percentage Change 0.12%
3,333.30
3,294.54
-38.76
-1.16%
May ‘12 Crude Oil
106.75
108.54
1.79
1.68%
Mar ‘12 Copper
3.8365
3.8590
0.0225
0.59%
Mar ‘12 Dollar Index
79.136
78.570
-0.566
-0.72%
Mar ‘12 Corn
6.2950
6.4450
0.1500
2.38%
Dec ’12 Corn
5.6375
5.5700
-0.0675
-1.20%
Dec ‘13 Corn
5.5025
5.5000
-0.0025
-0.05%
Dow Jones Ind. Avg. FTSEurofirst 80
Marketing Strategies 2012 Corn Marketing Plan. Corn broke out of its recent wedge pattern to the downside. In addition I received a sales signal from the moving average indicator: closing price < the 4-day moving average < 9-day moving average < 18-day moving average. This occurred on February 21st with a closing price of $5.63¾. I priced 20% of 2012 production on this move.
4
Feed Grain Market Outlook
February 27, 2012 Volume 21, Number 11
December Corn Futures and 2012 Marketing Plan ¢/bu
750
700
20% South American crop conditions Battle for Acres Planting Intentions
20%
20%
20%
20%
Early season Acreage Report/ crop Grain condition and Stocks weather outlook
Tassel and August Crop Report
Cash sales at harvest
650
600
550
500
Sold 20% at $5.63¾
11/1/2011 11/10/2011 11/21/2011 12/1/2011 12/12/2011 12/21/2011 1/3/2012 1/12/2012 1/24/2012 2/2/2012 2/13/2012 2/23/2012 3/3/2012 3/10/2012 3/17/2012 3/24/2012 3/31/2012 4/7/2012 4/14/2012 4/21/2012 4/28/2012 5/5/2012 5/12/2012 5/19/2012 5/26/2012 6/2/2012 6/9/2012 6/16/2012 6/23/2012 6/30/2012 7/7/2012 7/14/2012 7/21/2012 7/28/2012 8/4/2012 8/11/2012 8/18/2012 8/25/2012 9/1/2012 9/8/2012 9/15/2012 9/22/2012 9/29/2012 10/6/2012 10/13/2012 10/20/2012 10/27/2012 11/3/2012 11/10/2012 11/17/2012 11/24/2012 12/1/2012 12/8/2012 12/15/2012
450
Mark Welch Texas AgriLife Extension Economist 600 John Kimbrough Blvd Suite 335 College Station, Texas 77843 Tel. (979)845-8011 Fax. (979)845-4906
[email protected]
The opinions and recommendations expressed are solely those of the author and are intended for educational purposes only as part of the Texas AgriLife Extension Service. The author and Texas AgriLife Extension Service assume no liability for the use of this newsletter. Educational programs of the Texas AgriLife Extension Service are open to all people without regard to race, color, sex, disability, religion, age, or national origin. The Texas A&M University System, U.S. Department of Agriculture, and the County Commissioners Courts of Texas Cooperating
5
