We really need some better news. After all of the hoping for something to come out of the World Agricultural Supply and Demand Estimates Feb. 8, the only real surprise was a negative one for corn. We also continued bad news in corn usage because of another reduction in cattle numbers. The result? We ended up with new contract lows on corn and soybeans last week and just weak reasons why things get better.
Farm Futures summed it up Feb. 9: “The last thing you want to see when you harvest a big crop is reductions in consumption. But, unfortunately for the U.S. corn market, that is exactly what happened in Thursday’s report.”
In the latest WASDE report, the U.S. Department of Agriculture reduced corn consumption for human and industrial use by 10 million bushels. That was no big deal, but it was the wrong problem, and it was added to corn consumption which is lagging because of falling cattle numbers. The herd is now the smallest since 1973.
Corn got expensive and then started a trend to drop cattle numbers due to production costs, and the trend just keeps on going even though corn is cheap again.
The natural hope for a correction in the corn market would be an increase in exports. This would seem to be encouraged by the decline in price, but other countries (primarily Argentina and Brazil) are increasing production and taking some of the exports.
The result was March corn futures as low as $4.2825 Feb. 9, and $2.725 Feb. 12 — new contract lows. March futures did close above $4.305 Feb. 12, so thank God for small green apples, as a popular Western writer used to say.
There is some hope in the idea that USDA was too conservative about cutting Argentine corn production. The market is probably just looking at the fact that Argentina may export twice as much of the coming crop as it did the previous one.
Last year, they had a terrible drought, and they are trying to get back to normal. Some think it is still dry enough that the USDA version of the estimate is too high, which would eventually be good for the U.S. farmer.
Some analysts did express surprise that the Brazilian corn crop was cut in the USDA estimate. They still think the complete Brazilian safrina crop will be cut a little, both by dry conditions hurting yields and the fact that farmers will not plant the last acres due to dry conditions.
In the case of soybeans, prices have dropped because rain is being forecast in Brazil and Argentina. These are the just-in-time variety, which have to happen now. The really ugly news is that in the last few years, we have gone from relinquishing the title of largest exporter of soybeans to Brazil, and now this year, they may export twice as much as the U.S.
I saw a long online article about the increase in production this morning. Remember when the greenies were all fired up about Brazilians tearing up the rainforest to plant soybeans? Then, the articles and pictures came out in American farming magazines showing that the big expansion was really in the Cerrado (just tonight at a church small group, I talked to a Brazilian woman who educated me in how to pronounce that.) Anyway, it turns out they are scraping off the native vegetation on the Cerrado four times as fast as they are the rainforest, and they have done it enough to endanger the habitat and weather of the region.
The story as reported is that the Cerrado is easy to clear, but it is ecologically important. Burning it off puts CO2 in the atmosphere, and the area is getting drier. The rivers are being affected by lowered flow rates.
I don’t know the ins and outs of all that, and I am sure it is not any worse than a greenie says it is, although they very well may be correct. What I do know is that the Brazilians are pouring the fertilizer on and growing 80-bushel soybeans. In other words, they are now as good at this as we are, and there is still a lot of Cerrado to go.
Add to that bad export news the idea that China is cutting its imports, not just from us, but in total. It seems the Chinese hog market (remember, that is their number one meat) is in a big contraction because of low hog prices and high feed costs. Talk about a world market!
Just when we got used to making money because of the Chinese, we found out that all world producers are going to be struggling to move soybeans and corn. Maybe the slowdown in converting the Cerrado is just that there will not be high enough prices to justify the production there.
More troubling news
Now, we get to the ugly unknowns in the March Planting Intentions Report. It is now not that far away. I have speculated that our farmers might switch some acres to soybeans because corn is so cheap and so expensive to grow. What if we increase acres of soybeans and China buying dries up to where the U.S. and Brazilian farmers race to see who goes broke first?
Maybe not a good year for $500,000 combines and $6,000 land. Oh yeah, then there is the dicamba news. EPA has just ruled to vacate registrations for dicamba on soybeans and cotton that were developed to be “Dicamba Ready.”
The problem is that the pipeline is full of soybeans and cotton that are tolerant to the herbicide, and the pipeline cannot produce enough normal soybeans or enough herbicides that do not contain dicamba. This is a disaster waiting to happen in many areas, and the best that can be hoped for is that EPA comes out with an “existing stocks” policy that would allow the pipeline to spew out the seeds and herbicides already produced.
Stay tuned on this one. Planting starts in the South very soon. Hate to be committed to cotton in Alabama right now.
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