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BRIAN HOOPS

By Staff | Nov 21, 2014

Corn carryout

At just over 2 billion bushels, this year’s projected U.S. corn carryout would be the largest in a decade and would represent more than 50 days of use.

But as imposing as that supply total may appear, upturns in domestic demand are already underway that should draw down those inventories at a steady pace and serve to underpin corn prices going into 2015.

Indeed, the U.S. Department of Agriculture has dialed up total U.S. corn demand by 275 million bushels (2.1 percent) since June on the back of improved end-user margins fueled by multi-year low corn prices, and looks set to increase demand further going forward should domestic ethanol production continue to increase.

But just as this year’s bumper crop rounded out the growing season and started to get harvested across the country’s top growing regions, end-users of the grain dialed up their purchases and consumption of corn amid the friendly price environment that prevailed in late summer and early autumn.

Projected corn use by livestock feeders, the largest corn user group, is up 125 million bushels from the June estimate as a combination of firm cattle and beef prices alongside weak corn values boosts cattle production margins and promotes herd expansion.

Land values, rents

Lower commodity prices are taking their tolls on agriculture land values and rental rates. Accredited appraiser Brent Qualey, who is with Farmers National Co., said there’s still demand for land, but buyers and renters are being more selective.

People overlooked many flaws when there was very little land for sale or rent and there was high demand,” said Qualey, “A year or two ago, there were many, many people interested in a property and now, there aren’t the numbers we saw at the peak of the market.

Red River Land Co. President John Botsford said land and rent values have been drifting lower since early 2013.

There isn’t the exuberance there was when we had the high commodity prices. I would say in most areas, land values are off 15 to 20 percent from the end of 2012, but we haven’t seen the weakening yet on the rental side.

CORN ANALYSIS

Corn closed the week 14.5 cents higher. Last week, private exporters reported a sale of 130,000 metric tons of corn to Mexico.

Weekly corn exports showed sales of 19.9 million bushels.

In the weekly crop progress report, U.S. corn harvest was reported at 80 percent complete. This compares to 65 percent last week, 82 percent last year and 80 percent on average.

The USDA forecast 2014 corn production at 14.4 billion bushels, down slightly from the previous forecast of 174.2 bpa, but up 3 percent from 2013.

Based on conditions as of Nov. 1, yields are expected to average 173.4 bushels per acre, down 0.8 bushel from the previous forecast, but 14.6 bpa above the 2013 average.

If realized, this will be the highest yield and production on record for the United States.

Area harvested for grain is forecast at 83.1 million acres, unchanged from the previous forecast, but down 5 percent from 2013.

Adding to the bearish fundamentals is ending stocks forecast at 2 billion bushels. While this figure is down 73 mb from last month, it is still the largest ending stocks in more than 10 years.

With the latest rally, producers are advised to sell this year’s inventory into this rally and look at rally as a marketing opportunity for the 2015 year as well.

Strategy and outlook: Producers are 100 percent sold of the 2014/15 crop . They sold 10 percent of 2015 production. They should sell another 15 percent at $4.50 December.

SOYBEANS ANALYSIS

Soybeans closed the week 16.75 cents lower. Last week, private exporters announced a previous sale of 180,000 mt of soybeans to an unknown destination was changed to China.

Weekly export sales of soybeans showed sales of 39.5 mb.

The weekly crop progress report showed bean harvest 90 percent complete versus 90 percent one year ago and the five-year average of 91 percent.

Last week we were 83 percent complete.

The USDA announced 2014 soybean production is forecast at a record 3.96 billion bushels, up less than 1 percent from October and up 18 percent from last year.

Based on Nov. 1 conditions, the national yield is expected to average a record high 47.5 bushels per acre, up 0.4 bushel from last month and up 3.5 bushels from last year.

The area for harvest in the United States is forecast at a record 83.4 million acres, unchanged from last month.

The record yield forecast was offset by a 20 mb increase in exports and a 10 mb increase in crush. This comes in despite weak NOPA data in September, huge soymeal export commitments has forced the USDA to raise domestic usage.

Soybean ending stocks are unchanged at 450 mb, an eight-year high.

Strategy and outlook: Producers are 100 percent sold of 2014/15 production. They sold 10 percent of 2015 production and should s ell another 15 percent at $10.80 November.

This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Brian Hoops can be reached at (605) 660-1155.

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