Trade positions for Jan. 11 reports

- Corn stocks likely to be lowest in nine years. - Tracking corn consumption difficult due to several unknowns. - Industry keeping eye

HERE'S what is known: stocks are tight, uncertainty is still the name of the game and the weather will continue to be the biggest fundamental factor to watch in 2013.

The U.S. Department of Agriculture will take a swipe at those issues Jan. 11 with the release of three major reports: "Crop Production," "World Agricultural Supply & Demand Estimates" and "Grain Stocks."

Until those reports come out, the markets aren't moving too far in either direction.

Among the relatively few givens in the market are that grains and oilseeds, particularly in the U.S. pipeline, are extremely tight.

Rice Dairy market analyst Jerry Gidel last week predicted that the Dec. 1 corn stocks level will likely come in near 8.228 billion bu., the lowest such level in nine years.

Looking at all available data for exports, feed and biofuel demand and acreage trends, Gidel factored in a 60 million bu. decline in the final corn crop size because of an anticipated 571,000-acre drop in harvested area.

He isn't the only market observer expecting fewer harvested acres when the dust settles.

Farm Futures reported last week that its latest survey of producers put harvested area of corn at 87.75 million acres and corn production at 10.62 billion bu. (Table 1), slightly smaller than USDA's November estimate of 10.725 billion.

After surveying more than 1,550 growers and using Farm Service Agency certified acreage data, Farm Futures senior editor Bryce Knorr said production should come in below previous estimates, making good yields and large acreage especially important in 2013 to meet global demand.

Farmers appear to be responding to the call, as the survey also found that planting intentions for 2013 could surpass 2012 corn seedings (Table 2). Farmers reported plans to bump up corn planting to 97.75 million acres this year, nearly 1% larger than 2012 planted acreage.

Relative to the August survey, farmers' intentions have changed significantly; acreage projections called for only 93 million acres at that point.

While soybeans continued to perform well in the market, hovering near $15/bu., corn profitability nonetheless still drives producers to plant more corn acres and fewer soybeans. The Farm Futures survey found intentions of 76.84 million acres in 2013, compared with the USDA estimate of 77.2 million acres planted in 2012.

USDA won't release its "Prospective Plantings" report until March 28, so a good deal can change by then, particularly weather and prices.

Forecasting acreage intentions is notoriously challenging, given the multiple production-related and economic factors that influence a farmer's decision to plant one crop or another.

Similarly, forecasting the Dec. 1 corn stocks estimate is a difficult task, according to University of Illinois agricultural economist Darrel Good. In late December, he noted that, unlike gauging soybean stocks -- where considerable data on consumption are readily available -- estimating corn consumption is much less precise.

In fact, Good noted that uncertainty exists relative to the 2012 drought's impact on final harvested acreage, final average yield and imports of corn during the first quarter of the marketing year. Such uncertainty makes the task of forecasting Dec. 1 stocks with any confidence extremely difficult.

Uncertainty has been a watchword in the marketplace for some time, although the factors to which the label is applied continue to change.

For the latter weeks of 2012, for example, the uncertainty surrounded the fiscal cliff, while earlier in the year, the unknown was resolution of Europe's debt debacle (one could argue that uncertainty still exists for both situations, but the markets have, in some ways, moved on for now).

Question marks exist now for two critical export-related issues: the Mississippi River and a pending dockworker strike.

Industry groups are watching day-by-day developments on the river, assuming that a shutdown of commercial barge traffic could come any day. Meanwhile, no progress has been reported in labor talks between the U.S. Maritime Alliance and the International Longshoremen's Assn. (ILA).

Should either -- or, in a worst-case scenario, both -- of those situations disrupt the movement of agricultural products abroad, the implications for the markets are significant. Exports are such a critical component of the U.S. grain and meat trade that any interruption of trade has the potential to become a major stumbling block.



1. 2012 crop production




Planted, acres



Harvested, acres



Yield, bu./acre



Production, billion bu.




2. 2013 planting intentions


Acres, million

% of 2012*







Soft red winter wheat



Hard red winter wheat



White winter wheat



All winter wheat



Spring wheat






All wheat



*Corn and soybean change is versus USDA November 2012 estimate.

Source for Tables: Farm Futures.


Market recap

Sideways, with a lower bias: That was the short story of the markets last week. Finishing the second of two straight holiday-shortened trading weeks, traders were content to let prices drift lower ahead of the raft of USDA reports coming out this Friday.

Until those reports hit, expect prices to fluctuate slightly as traders position themselves ahead of the release.

Markets watched the fiscal cliff drama with great interest, although reactions were largely muted after Congress and the President reached a deal to permanently extend some tax cuts while failing to reduce spending.

Likewise, the trade watched developments on the ILA strike and the Mississippi River water levels throughout the holidays, even though both events have remained essentially status quo for the past two weeks.

On Jan. 3, China cancelled another 315,000 metric tons of U.S. soybean purchases for the current marketing year, though market reaction was far more muted than expected. To some extent, traders are waiting for bargain hunters to jump back into the export markets as corn, soybean and wheat prices have all moderated enough in recent weeks to improve their competitiveness in the global marketplace.

Last week's USDA "Hogs & Pigs" report suggested that there was far less sow herd liquidation than many had expected, implying that feed demand should remain strong in the coming months, although questions about beef herd liquidation linger.

Weather remains a concern on two fronts: (1) how rains will affect South American planting and production and (2) what the prospects are for crop-supportive moisture patterns in the U.S. during the coming growing season.

For now, uncertainty rules.


Ingredient watch

With corn and soybean prices waffling last week, ingredient prices did much of the same.

For the most part, 2012 ended fairly quietly. With the "container cliff" averted that threatened to disrupt some ingredient sales overseas, prices trended fairly sideways into the new year. ILA agreed to extend contract negotiations for only 30 days, however, so the possibility of disrupting containerized shipments at the month's end is still very real.

China appears to be shifting its interests from buying U.S. soybeans to buying soybean meal, perhaps an indication that soybean meal prices could start trending higher in the next several weeks. Crush demand remained strong, but prices still slid lower heading into last Friday's trade.

For many ingredients, corn and soybeans will continue to set the tone in the next several weeks, and the Jan. 11 USDA reports will be the next major touchstone in that process.

Volume:85 Issue:01

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