GRAIN MARKETS: Funds flee soybeans when chart supports give way

market

Grain futures closed lower on Monday, with steep losses in soybeans leading the way down. Absence of Asian buyers who are off for Lunar New Year holidays, along with a sell-off on Wall Street, opened the floodgates as funds liquidated bullish bets.

Stocks sold off in Europe and continued to hemorrhage in the U.S., sending the Dow back below its 20,000 milestone from last week in the first hour of trading. The dollar was also volatile, rallying off overnight lows before moving back into the red. Officials at the Federal Reserve begin a two-day meeting on monetary policy Tuesday. While no changes to interest rates are expected, central bankers could adjust the wording of their statement to address some of the new risks in the market.

Despite the big moves elsewhere, crude oil posted fairly modest loses after two-sided trade. Last Friday's "Commitment of Traders" showed that money managers built up their net long position in crude to its biggest level ever while also buying crops and livestock.

Corn prices sold off in sympathy with the downdraft in soybeans, as March futures failed to hold chart support at the line drawn off December and January lows, trading below the 50-day moving average before firming somewhat.

Selling in new crop continues to be more limited on ideas farmers could cut acreage this spring. The latest ammunition on that front came from the fertilizer market, where ammonia contracts for February at the Gulf jumped 28%, on top of earlier increases for urea and UAN.

Better demand news also helped keep corn from falling apart. USDA announced the sale of 4.1 million bushels to Columbia under its daily reporting system for large purchases. And the agency later reported export inspections of 41.8 million bu. last week. That beat the high end of trade guesses, though it still lagged the total needed every week through August to reach USDA's forecast for the 2016 crop.

Year-to-date inspections are well above that pace, thanks to a strong start to the shipping season boosted by a short crop last year in Brazil. The additional demand has kept shipments above average levels since harvest. Inspections typically begin rising from January into April, the peak U.S. shipping season.

Soybeans hit the skids big time on Monday, with the slow drip lower of the last two weeks turning into a deluge. March futures failed to hold moving average support above $10.30, opening the door to more widespread liquidation. Friday's Commitment of Traders showed big speculators added 33,344 contracts to their bullish bets as of Tuesday, crowding the doors as sellers rushed the exits.

Soybeans have showed a modest correlation to stock prices recently, so the selling on Wall Street added pressure as weather in Argentina continues to improve as well.

Export inspections of 59.9 million bushels were well above the top end of trade guesses and nearly tripled the weekly rate forecast by USDA for the rest of the crop year. Year-to-date inspections are running 8% above that pace. The good showing came even though China accounted for 55% of the business, down from recent levels. Chinese traders are off until Friday, when markets reopen after Lunar New Year holidays.

Wheat prices followed other markets lower, as concerns about demand resurfaced. Minneapolis March paced the losers on bear spreading with deferreds, after spring wheat basis continued to weaken last week. Chicago March couldn't hold a test of its 50-day moving average, which the hard red winter wheat contract was able to close above0.

Wheat inspections out this morning remained subdued, despite a big week of new export bookings reported last week. Total inspections of 11.8 million bushels were in line with trade guesses, but fell more than 8 million below the rate forecast by USDA for the rest of the marketing year. Year-to-date inspections are running 9% behind that pace.

Crop ratings out this week for January will show some states coped with variable winter weather. Much of the hard red winter wheat belt on the Plains received above average precipitation over the past 30 days, though the current outlook is dry for the next two weeks.

Freezing cows die from fescue foot; no known cure, but prevention works

Reports of “fescue foot” causing loss of cows are coming in, according to University of Missouri Extension forage specialist Craig Roberts.

In severe cold weather, cows eating toxic fescue, a widely used pasture grass, suffer frozen feet with lost hooves. In one case a Missouri a producer lost five cows out of a herd of 30. Other cases, less severe, are being reported.

An alkaloid from a fungus growing inside the plants of Kentucky 31 tall fescue causes losses. Once a foot is frozen, leaving a bloody stump, the cow cannot be cured.

“We’ve known prevention for 15 years,” Roberts said. “There are ways to reduce the problem but only one preventive: Replace toxic fescue with a new variety.”

The Alliance for Grassland Renewal works to teach farmers how to renovate old pastures and plant one of several new grasses known as “novel-endophyte fescue.”

The alkaloid in the old endophyte fungus causes blood vessels to contract. In winter, this vasoconstrictor shuts blood flow to body extremities. Feet, tails and ears can freeze.

A cow can survive a lost tail switch, but she can’t walk to graze with frozen feet, Roberts said. Crippled cows must be put down.

Low blood flow in summer causes heat stress. This isn’t fatal, but it causes unseen economic losses. Cows in heat stress quit grazing and head to shade or to ponds to cool off.

Animals that stop grazing stop gaining weight. That loss cuts farm income when calves are sold.

“Losing a cow is losing the calf factory,” Roberts said. “This is serious.”

Fescue foot was first reported 75 years ago. It took until 1977 to discover the cause, an endophyte fungus. That threadlike growth lives between plant cells in the grass.

It’s a symbiotic relationship. The endophyte protects fescue from insects, diseases, drought and overgrazing.

Other naturally occurring endophytes give protection but don’t have the vasoconstrictor alkaloid.

“Replacing toxic fescue with a novel-endophyte variety has huge economic benefit,” Roberts said. “It does require a season-long process to kill the old variety and reseed to new fescue.”

Renovation and its benefits are taught in daylong schools held by the Alliance.

The schools this year are in three states, Kansas, Missouri and Kentucky. The extension services in each state help the Alliance.

School dates and locations include March 6 in Mound Valley, Kan.; March 7 in Mount Vernon, Mo., and March 9 in Lexington, Ky. Each school runs 9 a.m. to 5 p.m. Advance registration is required for limited seating at all schools. Details are at www.grasslandrenewal.org.

Fescue foot has an economic loss. However, losing a cow has an emotional impact as well. The loss is personal.

Other losses are mostly unseen, Roberts said. Abortions of early pregnancies are almost never seen. That doesn’t have the same impact on producers.

Fescue foot is third or fourth down the list of losses, Roberts said. Loss of unborn calves brings bigger dollar losses. Alkaloid also lowers daily gains. That cuts weaning weights. “It’s a big loss on payday,” he said.

Fescue foot cases dropped in recent warmer winters. However, other losses continue in all seasons.

“We know how to prevent losses, estimated at $900 million a year,” Roberts said. “Producers solve problems and increase profits by planting novel-endophyte fescue.”

Roberts warned that seeding an endophyte-free fescue doesn’t work. “We tried that in Missouri,” Roberts said. “Fescue needs endophyte protection to survive much past one year.”

U.S. dairy companies call out Canada's protectionist policies

milk truck

The U.S. dairy industry this week continued to push back against Canada’s protectionist policies that are effectively blocking American dairy imports into the country, in violation of international agreements. A group of 17 dairy companies representing dairy farmers and processors from coast to coast asked governors in 25 states to urge Canadian policy-makers to uphold existing trade commitments with the U.S. and halt the imminent implementation of a national strategy that would unfairly subsidize Canadian dairy products in its domestic and global markets.

In the letter to the governors, the groups said U.S.-Canada trade "cannot be a one-way street, with Canada expecting to enjoy the benefits of exporting its products of interest to our market while denying a sector accounting for hundreds of thousands of jobs in rural America reliable access to the Canadian market. (An existing provincial) program has already cost U.S. companies tens of millions of dollars in exports, thereby harming the dairy farmers, dairy plant employees and rural communities that depend on the benefits those foreign sales bring.”

Beginning Feb. 1, Canada is poised to expand the product scope of that provincial program while instituting it nationally. It also intends to disrupt skim milk powder markets around the world by using the new program to dump excess milk powder on global markets.

The 17 dairy companies sent the letter to governors in states with significant numbers of dairy farms and dairy processing companies because of the damage Canada’s policies have had already or are poised to have on these farms and companies as well as their employees and many communities. The letter urges state officials to “consider all tools at their disposal to ensure Canada understands the seriousness of this issue.”

The states are: Arizona, California, Colorado, Idaho, Iowa, Indiana, Kansas, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Mexico, New York, North Dakota, Ohio, Pennsylvania, South Dakota, Texas, Vermont, Virginia, Washington and Wisconsin. Read the letter here.

Earlier this month, U.S. dairy organizations and state departments of agriculture across the country sent a similar letter to President Donald Trump that said Canada’s protectionist policies are in direct violation of its trade commitments under the North American Free Trade Agreement (NAFTA) and the World Trade Organization. The organizations urged the President and his key Cabinet members to take immediate action. The letter to Trump was signed by the International Dairy Foods Assn. (IDFA), the National Milk Producers Federation (NMPF), the U.S. Dairy Export Council (USDEC) and the National Association of State Departments of Agriculture (NASDA).

“In the current trade climate across North America, it is foolhardy for Canada to continue provoking the United States with a course of action that so blatantly violates our trade agreements,” said Jim Mulhern, president and chief executive officer of NMPF. “We need our nation’s governors to join in our call for Canada to step back from the brink of what it is about to do and take steps to remind Canada how critical trade is to its own interests as well.”

“Despite Canada’s efforts to distance itself from the administration’s focus on enforcement and improving how NAFTA functions, it is Canada – not Mexico – that has time and again chosen to disregard its dairy trade commitments to the United States and intentionally dismiss serious concerns from the United States about the impact its dairy policies are having on trade,” Matt McKnight, acting chief operating officer of USDEC, said. “Canada should take a page out of Mexico’s book and hold up its end of the bargain to us on dairy trade.”

Dr. Michael Dykes, president and CEO of IDFA, added, “The U.S. dairy industry is united on this issue because these policies and incentives severely hinder U.S. exports to Canada and threaten our ability to remain competitive in markets around the world. IDFA will continue to speak out against Canada’s protectionist policies on Capitol Hill, with members of the Trump Administration and among state governors and legislators while asking for changes that will force Canada to honor its trade commitments and allow more access for U.S. dairy products.”

U.S., U.K. lay groundwork for bilateral trade deal

Mark Wilson/Getty Images British Prime Minister Theresa May and US President Donald Trump hold press conference in Washington DC
U.S. President Donald Trump and British Prime Minister Theresa May participate in a joint press conference at the East Room of the White House on Jan. 27, 2017, in Washington, D.C.

During a meeting Friday at the White House, President Donald Trump and British Prime Minister Theresa May agreed to hold preliminary talks on a trade deal, which can’t be finalized until the U.K. leaves the European Union.

The U.K. in June 2016 voted to exit the economic bloc, which was formed after World War II to promote economic growth and to avoid conflict among the 28 EU member countries. Trump and May agreed to set up working groups to consider ways to improve trade between the countries before the U.K. -- which consists of England, Northern Ireland, Scotland and Wales -- exits the EU. The so-called Brexit process may take up to two years.

In opening remarks made by the two leaders, May noted that trade between the two countries is already worth more than £150 billion pounds ($187 billion) per year.

May said they were discussing how to establish a trade negotiation agreement, “take forward immediate, high-level talks, lay the groundwork for a U.K.-U.S. trade agreement and identify the practical steps we can take now in order to enable companies in both countries to trade and do business with one another more easily.”

She added that she is convinced that a trade deal between the U.S. and the U.K. is in the national interest of both countries and would cement the crucial relationship that exists between the two nations, especially as the U.K. leaves the EU and reaches out to the world.

Given its desire to negotiate a free trade agreement with the U.K., it is unclear if the Trump Administration will continue trade talks with the EU through the Transatlantic Trade & Investment Partnership (TTIP). Those negotiations have been limping along nearly since TTIP was initiated in 2013.

The National Pork Producers Council (NPPC) applauded the Trump Administration for recognizing the importance of free trade agreements to American agriculture and the entire U.S. economy. “We’re pleased that it will work for a stronger trade relationship with the United Kingdom through a mutually beneficial trade agreement,” NPPC president John Weber said.

Although NPPC had been supportive of TTIP, it was skeptical that U.S. hog farmers – or any other farmers – would get a good deal out of the agreement, given the EU’s intransigence on eliminating tariff and non-tariff barriers on agricultural products, including pork.

“In pursuing better trade with the U.K. and working toward a free trade agreement with it, I think the administration recognized that TTIP isn’t going anywhere,” Weber said. “We’re pleased President Trump is instead focusing on bolstering our historic ties with the U.K.”

BBQ 'Socials' in Taiwan generate strong interest in U.S. beef

beef cut

The U.S. Meat Export Federation (USMEF) said it held a series of events in Taiwan in 2016 to showcase American-style barbecue after recognizing an opportunity to increase sales of U.S. beef by attracting a younger generation of consumers. The campaign, which began with U.S. beef seminars focused on new cuts and culminated with “Live Your Passion, Let’s Go Party for U.S. Beef BBQ” social events at the end of the year, was funded by the beef checkoff program, the Texas Beef Council and the Beef Promotion & Research Council of Texas.

More than 100 restaurants and food stands in Taiwan participated in the promotion, many of them recruited by USMEF during the spring seminars.

“To say that barbecue has become a big part of the Taiwanese culture would be an understatement: Barbecue restaurants from all over the world have established themselves here,” explained Alex Sun, USMEF marketing manager in Taiwan. “The barbecue culture in Taiwan is very different from other kinds of food culture in that it’s a channel for the young generation. Taiwan’s younger consumers worship celebrities and stars, especially from Japan and Korea, and the barbecue cultures from these two countries are gaining traction in the Taiwanese foodservice market. This trend has attracted American barbecue establishments, which are becoming a popular choice for young Taiwanese people.”

Social media helps spread the word

Social media also played a big role in the year-long promotion, according to USMEF.  An event website and Facebook page were established to share information and to attract attention. Consumers who went to participating restaurants uploaded their photos on the Facebook page to enter a drawing for prizes.

Taiwanese food bloggers were invited to interview people at the restaurants, and a media luncheon brought together many different barbecue restaurant chains – an unprecedented undertaking in the Taiwan's foodservice market, Sun noted.

USMEF invited Fabio, a celebrity icon in Taiwan, to participate in a special program titled “Fabio Comes to My Home” to promote U.S. beef barbecue.

A video starring Fabio was produced and posted on Facebook and YouTube to attract foodservice operators and pique consumers’ curiosity about U.S. beef. The video shows Fabio choosing U.S. beef at a retail meat case and later preparing a meal for a Taiwanese family. That video can be seen at https://www.youtube.com/watch?v=-n_eO3CumBU.

Additionally, USMEF’s included food stands from night markets in Taiwan, which helped pull a younger crowd into the promotion.

“It was the first time USMEF worked with the stands to promote U.S. beef,” said Davis Wu, USMEF director in Taiwan. “Through the cooperation of local operators, food stands serving U.S. beef barbecue were able to communicate with these young consumers face to face.”

USMEF

‘Live Your Passion, Let’s Go Party for U.S. Beef BBQ’ was the theme of the U.S. beef promotion

New cut seminars

USMEF reached out to Taiwan’s barbecue restaurants months before the consumer events to introduce them to the advantages of using U.S. beef and recruit them to participate in the promotions.

“We wanted to provide them with the opportunity to learn more about U.S. beef,” said Wu. “We had several demonstrations featuring Kevin Woolf, an American barbecue expert. USMEF has been highlighting U.S. top sirloin cap, and we asked Woolf to prepare this cut at the seminar and present it in an American-style barbecue.”

Discussions during the seminars carried over to the barbecue promotional events, as some foodservice operators and importers inquired about cuts like brisket and top sirloin cap, showing that USMEF’s barbecue promotions successfully created attention for alternative cuts that are a good fit for barbecue.

“Our strategy was to work with restaurants and retailers throughout the campaign to make sure that consumers, whether they choose to dine out or prepare meals at home, always make U.S. beef a top option,” Wu said.

USMEF said 2016 was an outstanding year for U.S. beef exports to Taiwan. Through November, exports were up 22% year over year in volume to 39,299 metric tons. Export value was up 10% to $319.5 million – already setting a new full-year record.

Monsanto, 2Blades collaborate to combat corn disease

Kenneth Schulze/iStock/Thinkstock corn field under bright blue sky

Monsanto Co. and 2Blades Foundation (2Blades) announced that they have formed a collaboration to discover novel sources of genetic resistance to devastating corn diseases, and 2Blades will deliver these resistance genes in collaboration with its long-term partner The Sainsbury Laboratory in Norwich, U.K., a global institute for research on plant/pathogen interactions.

“Mid- and late-season corn disease complexes such as stalk and ear rots are among the most significant corn diseases and are endemic across many major growing regions, with the potential to cause significant yield losses,” Tom Adams, Monsanto biotechnology lead, said. “With few effective treatment options or resistant hybrids available, developing new solutions is critical, and this collaboration will help bring much-needed disease resistance solutions to corn farmers.”

The mission of 2Blades is to contribute to worldwide food security by developing crops with long-lasting resistance to pathogens in order to reduce losses due to disease.

“This program aims to produce genetic solutions for a difficult set of diseases that causes significant yield loss in corn,” 2Blades president Diana Horvath said. “The combination of The Sainsbury Laboratory's extensive expertise in the molecular basis of plant disease, 2Blades' proficiency in managing the discovery and advancement of plant disease resistance and Monsanto's proven ability to deliver products to farmers provide a strong foundation for producing new genetic solutions for corn diseases.”

Cyril Zipfel, head of The Sainsbury Laboratory, noted that the laboratory's "dual mission is to carry out fundamental research and to capitalize on these discoveries to reduce crop losses to important diseases. This collaboration allows us to address important crop problems with a partner that can bring the solutions to market.”

The collaboration complements Monsanto's work to discover and develop products that help farmers protect yield with broad-spectrum and durable disease control against economically important broad acre diseases, according to the announcement. Furthermore, 2Blades will retain the rights to deploy new leads arising from the program in crops for subsistence agriculture.

Monsanto produces seeds for fruits, vegetables and key crops like corn, soybeans and cotton that help farmers improve their harvests while using water and other important resources more efficiently. The company collaborates with farmers, researchers, nonprofit organizations, universities and others through programs and partnerships to help tackle some of the world's biggest challenges.

The 2Blades Foundation, based in Evanston, Ill., is a charitable organization dedicated to the discovery, advancement and delivery of durable disease resistance in crops. It establishes and manages development programs addressing significant unsolved crop disease problems in collaboration with leading research institutions around the world and at the 2Blades Group in The Sainsbury Laboratory.

The Sainsbury Laboratory focuses on making fundamental discoveries about plants and how they interact with microbes, providing fundamental biological insights into plant/pathogen interactions and also delivering novel, genomics-based solutions to reduce losses from major diseases of food crops, especially in developing countries.

Deadline nears for filing for $52m dairy settlement

dairy cows eating

Consumers in 15 states and Washington, D.C., who purchased dairy products have mere hours left to claim a portion of a $52 million settlement culminating from a massive lawsuit filed against the nation’s largest dairy producers for allegedly artificially inflating the price of milk and other dairy products through a herd retirement program.

The suit was originally filed in 2011 against Land O’Lakes Inc. as well as the National Milk Producers Federation (NMPF), a.k.a. Cooperatives Working Together (CWT), Dairy Farmers of America Inc., Dairylea Cooperative Inc. and Agri-Mark Inc., according to the law firm Hagens Berman.

The class-action suit stated that defendants engaged in a nationwide conspiracy to limit the production of raw farm milk by prematurely slaughtering cows, illegally causing the price of milk and other fresh milk products to inflate artificially.

Under the terms of the agreement, CWT will pay $52 million to the plaintiff class in a combination of cash and in-store loyalty cards to be used for the purchase of fresh milk products.

Jim Mulhern, NMPF president and chief executive officer, said it is important to note that the court found no antitrust violation and that CWT has made no admission of wrongdoing in the settlement. The activity at issue in the litigation – the herd retirement program – has long since been terminated by CWT.

“Our CWT leadership team, with support from the CWT membership, has worked diligently to put this legacy issue behind us,” Mulhern said. “Settlement of this litigation is the most sensible and responsible course of action to maintain the current CWT Export Assistance program and allow us to focus on the future.”

Mulhern added that the CWT program is poised for a quick rebound and a strong future. “We will continue to focus on CWT’s present mission of providing member cooperatives with export assistance, creating new export market opportunities and continuing to look for innovative ways to increase sales of milk and dairy products for participating cooperatives,” he said.

Filing a claim

If you purchased milk or other fresh milk products (cream, half-and-half, yogurt, cottage cheese, cream cheese or sour cream) while a resident of Arizona, California, Kansas, Massachusetts, Michigan, Missouri, Nebraska, Nevada, New Hampshire, Oregon, South Dakota, Tennessee, Vermont, West Virginia, Wisconsin or Washington, D.C., at any point between 2003 and the present, you may be eligible for reimbursement.

Submit a claim form online at www.boughtmilk.com or by mail to Fresh Milk Products Antitrust Litigation, P.O. Box 43430, Providence, RI 02940-3430. Forms must be received by Jan. 31, 2017.

Those who submit a claim may opt for cash, with no proof of purchase required. If final approval is granted to the settlement, class members who have filed valid and timely claims will receive cash payments distributed directly into an online account of their choosing, e.g., Amazon, PayPal or Google Wallet account.

There will be two different levels of fixed cash payments based on a class member’s purchases and the total number of class members making claims. Any remaining funds may be distributed in a second round using grocery loyalty cards to be automatically loaded with a fixed dollar amount, based on triggering purchases of milk or fresh milk products in the relevant states or, depending on the funds remaining, distributed to the attorneys general for the class jurisdictions for use in prosecuting consumer antitrust claims.

Danforth Center expands sorghum research program

Shutterstock sorghum crop growing in field

The Donald Danforth Plant Science Center, one of the world's largest independent plant science institutes, announced that it received a three-year, $6.1 million grant from the Bill & Melinda Gates Foundation to expand and accelerate the development and deployment of advanced sorghum phenotyping and breeding technologies in support of improved varieties for smallholder farmers.

“The Gates Foundation recognizes that most smallholder farmers rely on small plots of land for food and income. This grant will help increase the productivity of a crop that can, in a sustainable and effective way, reduce hunger and poverty and make communities economically stronger and more stable over the long term,” Danforth Center president Dr. James Carrington said.

The funding broadens the impact of the TERRA-REF program launched in June 2015 by the Danforth Center with support from the U.S. Department of Energy's Advanced Research Projects Agency-Energy (ARPA-E). TERRA-REF aims to optimize breeding strategies for improving the yield and stress tolerance of sorghum (sorghum bicolor), which is a leading bioenergy feedstock crop in the U.S. but also a critical source of nutrition for millions of people living in sub-Saharan Africa.

The Sorghum Genomics Toolbox — led by the Danforth Center with partners at ICRISAT (India), CERAAS-ISRA (Senegal), CIRAD (France), EIAR (Ethiopia), HudsonAlpha Institute for Biotechnology, Kansas State University, University of Arizona, George Washington University and NRGene (Israel) — is employing cutting-edge technologies to sequence and analyze grain sorghum genomes, capture tens of millions of phenotypic observations over the course of a growing season and accelerate breeding efforts by connecting phenotypes to genotypes in the field.

“Initially, we launched the TERRA-REF project to gain a greater understanding of the phenotypic and genomic variation of bioenergy sorghum and to lay the foundation for genomics-enabled breeding strategies for U.S. sorghum bioenergy feedstock production, but the same strategies are directly extendable to food security crops,” said Dr. Todd Mockler, the Geraldine & Robert Virgil distinguished investigator with the Danforth Center. “I'm grateful to the Bill & Melinda Gates Foundation for recognizing the need to extend the application of advanced genomics and phenomics technologies to food crops that will benefit millions of people living in the developing world.”

Sorghum is a member of the grass family and is grown worldwide. It is of interest not only because it is a staple crop in sub-Saharan Africa but because grain sorghum yields have been flat or declining due to the lack of sufficient investment in the development of new improved varieties.

"Exploring the broad genomic diversity of grain sorghum is a fundamental step toward accelerated breeding of more productive varieties,” said Gil Ronen, chief executive officer of NRGene, a genomic big data company. “We are honored NRGene's tools were selected to advance breeding of staple crops such as grain sorghum."

Sorghum is very resilient to drought and heat stress. Natural genetic diversity in sorghum makes it a promising system for identifying stress-resistance mechanisms in grasses that may have been lost during the domestication of related cereal crops. It is among the most efficient crops in conversion of solar energy and use of water, making it an ideal crop to target for improvement to meet the predicted doubling of global food demand by 2050.

Tim Lust, CEO of the National Sorghum Producers, said the organization “is excited to see the additional investment into sorghum research and breeding, which will help farmers around the world as they continue to deal with the challenges of advancing sorghum genetics to address climate variability and the need for increased food sustainability.”

Founded in 1998, the Donald Danforth Plant Science Center is a not-for-profit research institute with a mission to improve the human condition through plant science. Its research, education and outreach aim to have an impact at the nexus of food security and the environment. The center's work is funded through competitive grants from many sources, including the National Institutes of Health, DOE, National Science Foundation and Bill & Melinda Gates Foundation.

Nutriad comments on U.S. poultry industry

As the U.S. is moving from a turbulent 2016 into a new year with an uncertain political outlook, it is important for the poultry industry to understand the various scenarios that may unfold in the near future and possible changes in global trade agreements, currency exchange rates, regulations and the overall cost of production. Using insights from industry experts within the Nutriad group and input from external consultants, the multinational feed additives producer reviews several possible scenarios and shares its vision of the year ahead.

Poultry market and forecast

Broiler production and turkey production both were short in the last quarter of 2016. Broiler production is expected to increase in the first quarter of 2017. The U.S. Department of Agriculture's forecasts for 2017 prices were increased slightly for broilers and were lowered for turkeys.

As of January 2017, broilers had a slight increase in price, reaching 87 cents/lb., with a forecast for the year of 80-86 cents/lb. for the whole bird.

The turkey production is estimated to have an increase of 245 million lb. on year-ending stock versus previous expectations. This leads to an expected increase in year-ending stocks for 2017 to 275 million lb.

In the egg market, prices are maintained to a level of 73-76 cents/doz. after a common drop in the couple of weeks following the holidays. With more than 307 million hens in production and a record number of 100 eggs produced per hen, it should maintain high stock level on dried egg and frozen egg products. Expectations for the first quarter are in the range of 78-82 cents/doz.

Overall, the poultry market should have a positive year, with steady prices and maintained or slightly reduced feed costs.

Grady Fain, senior vice president for Nutriad in the U.S., said, “Nutriad is confident about the 2017 outlook for the poultry industry in the U.S. Through the market ups and downs, Nutriad will continue to working with customers across the country to deliver additive solutions that positively impact their bottom line."

Political scenario

The election of President Donald Trump will most certainly bring changes in the overall trade and currency panorama. The outlines of some of those changes can already be seen in his first days in office. The U.S. withdrawal from Trans-Pacific Partnership (TPP) will leave a vacuum to be filled by China, giving it greater importance in Asia and the Pacific Rim. However, the U.S. may establish bilateral trade deals with Philippines, Malaysia, Indonesia and Thailand.

According to USDA, close to 18% of the total poultry production in U.S. is exported. This is what makes the U.S. poultry industry extremely sensitive to currency fluctuations, trade negotiations and economic growth in importing markets.

The renegotiation of the North American Free Trade Agreement (NAFTA) can also disturb current trades with Mexico and Canada, and the threat to overtax Mexican products in 20% might have a direct effect on bilateral trade. In 2015 Mexico's poultry imports from U.S. --- not counting eggs -- reached more than $1 billion.

The devaluation of the Mexican peso versus the U.S. dollar might favor Mexico's imports from South American countries such as Argentina, Chile and Brazil over the U.S. In January 2017, the value of the peso fell almost 20% compared to January 2016.

Regulations and welfare

The appointment of Scott Pruitt as head of the Environmental Protection Agency and possible increased industry-focused policies, including easing regulations imposed by the past government, might have a positive impact on poultry producers. However, consumer-driven demands are still influencing the way retailers and fast-food chains select their suppliers.

The enigma currently faced by producers is to decide which aspects of welfare should be followed. The reduction in density, having smaller-scale operations and using non-biotech ingredients will demand a greater need for land and resources, consequently negatively affecting industry sustainability.

The new Veterinary Feed Directive might also have an impact on operation procedures and costs as companies adjust to the withdrawal of antibiotic growth promoters and adapt to natural alternatives.

Sanitary barriers and avian influenza

Avian influenza (AI) outbreaks throughout the Asian countries and the European Union will play an important role in the U.S. poultry trade. According to USDA, the egg export forecast has increased in 30 million doz. eggs following an AI outbreak in South Korea.

The dissemination of recombinant highly pathogenic AI strains by migratory birds will alter trade patterns that affect the outlook for Asia, Europe and Africa. Even with strains such as H5N8 possibly being eradicated in the EU and H5N6 being controlled in a few more months in South Korea and Japan, there will be potential re-introduction of other strains.

The dissemination of AI, and its endemic situation in wild birds, can have a long-term impact on global market conditions. AI creates business risks to companies, which then must adjust their business model, paying high attention to biosecurity and close involvement with local government.

Commodities

The 2016 harvest is projected to break records in yield and total production, according to USDA's "World Agricultural Supply & Demand Estimates" report.

In the U.S., the average corn yield of 11,000 metric tons per hectare (175.3 bu. per acre) on about 35.1 million hectares (86.8 million acres) harvested will translate into an estimated crop of 386.8 mmt (15,226 million bu.), which would be the largest U.S. corn crop on record.

Argentina and Brazil also are following a strong trend and should reach record numbers in corn production due the prospect of favorable returns and good weather conditions. Brazil is estimating a harvest of 215 million tons of grains, with more than 108 million tons of that for soybeans, which means an 8.7% increase in production compared to last year. Argentina, even with recent reports of floods, is estimating 36 million tons of corn and 55 million tons of soybeans.

The elevated production numbers, combined with China’s high stocks, will pressure commodity prices in the national and global markets. Overall prices should be maintained at close to the current $3.58/bu. for corn and $10.32/bu. for soybeans.

Nutriad delivers products and services to more than 80 countries through a network of sales offices and distributors. These are supported by four application laboratories and five manufacturing facilities on three continents.

USDA: Cattle on feed up slightly

DarcyMaulsby/iStock/Thinkstock. Cattle in Nebraska feedlot
CAPACITY CONSTRAINTS: Expanding beef processing capacity today may be fixing yesterday's problem as cattle cycle turns to lower production.

Cattle and calves on feed for the slaughter market in the U.S. for feedlots with capacity of 1,000 head or more totaled 10.6 million head on Jan. 1, 2017, only slightly above Jan. 1, 2016. Pre-report estimates had suggested that the U.S. Department of Agriculture would decrease the inventory by 1%. The inventory included 7.02 million steers and steer calves, down 2% from the previous year. This group accounted for 66% of the total inventory. Heifers and heifer calves accounted for 3.58 million head, up 5% from 2016.

The most surprising number from the report was placements in feedlots during December. USDA reported placements totaled 1.80 million head, 18% above 2015. The trade had only expected an 8% increase.

Net placements were 1.74 million head. During December, placements of cattle and calves weighing less than 600 lb. were 435,000 head, 600-699 lb. were 450,000 head, 700-799 lb. were 450,000 head and 800 lb. and greater were 460,000 head.

Marketings of fed cattle during December totaled 1.79 million head, 7% above 2015. This was in line with the trade’s pre-report estimates.

Other disappearance totaled 55,000 head during December, 29% below 2015.