Feedstuffs is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

USDA expects decline in planted area, prices

USDA expects decline in planted area, prices
Rain continues to cause delays in South America as USDA projects falling prices for row crops.

ALTHOUGH the outlook for 2014-15 suggests a further rebuilding of global grain stocks and a further moderation of crop prices, global demand is expected remain strong, which will continue to keep pressure on supplies, according to Joe Glauber, chief economist for the U.S. Department of Agriculture.

Speaking at USDA's 2014 Agricultural Outlook Forum last week, Glauber said despite the rebuilding that has happened over the past year, current stocks remain tight, which means prices will continue to be vulnerable to supply shocks.

USDA is projecting that U.S. planted area for the eight major row crops will decline only slightly in 2014. Total plantings of corn, wheat and soybeans are projected to be 227.0 million acres, a decrease of 1.1 million acres, mostly reflecting a decline in soft red winter wheat seedings last fall.

USDA projected that U.S. farmers will plant 171.5 million acres of corn and soybeans, about 400,000 fewer acres than in 2013. Stronger soybean prices relative to corn should favor soybean plantings this year. The soybean-to-corn futures price ratio for fall 2014 delivery has been at 2.5, which favors soybeans.

"We project that corn area will fall to 92 million acres, a decline of 3.4 million acres from 2013 levels," Glauber said. "Soybean acreage is projected at 79.5 million acres, up 3 million from 2013. Smaller (soft red winter) wheat plantings and lower soybean prices will likely reduce soybean double cropping in 2014."

Glauber said with another sizable harvest, prices for most row crops are expected to fall to the lowest levels since 2009-10.

A return to normal yields for spring-planted crops could see soybeans and corn set new production records, which will result in significant stock building and, ultimately, lower crop prices.

Corn prices are projected to fall to $3.90/bu., a decline of 60 cents/bu. and the lowest season average price for corn since 2009-10. Soybean prices are forecasted to be $9.65/bu., also the lowest season average price since 2009-10 (Table).

"Because of continued tight ending stocks, markets will likely remain sensitive to supply shocks both in the U.S. and abroad," Glauber added.


Corn and soybean supply and price, by marketing year






Planted area, million acres











Season average farm price, $/bu.











Source: U.S. Department of Agriculture.


Crop insurance

According to Gary Schnitkey, farm management extension specialist for the University of Illinois department of agricultural and consumer economics, the 2014 farm bill should not change crop insurance programs for the coming year, but it may affect crop insurance decisions in 2015.

The two most significant differences between the 2013 and 2014 crop insurance decision-making environments are: (1) dramatically lower projected prices and (2) the introduction of the area risk protection insurance policy.

Even given these differences, Schnitkey said the basic recommendation for policies should not change in 2014. He said most farmers will find adequate protection with a revenue protection policy at a 75% or higher coverage level using enterprise units and the trend-adjusted yield endorsement, while some farmers will find the area revenue protection and revenue protection with the harvest price exclusion useful.


Rabobank outlook

Rabobank recently released its outlook for South America in which it expects another year of record production for several of Brazil's major agricultural crops in 2014, including soybeans and, depending on weather developments, sugarcane.

However, according to a recent research note, international prices for many of Brazil's agricultural commodities fell in 2013 and could decline further in 2014.

Infrastructure and logistics remain key points of concern for the country for 2014, particularly for the export market. With production and export volumes set to rise again and after further increases in transportation fuel costs were implemented at the end of 2013, Rabobank said there is little chance that logistics costs will decrease in 2014.

"Due to slowing economic growth and high inflation in Brazil, the domestic market will have limited scope to drive growth in sales in 2014," Rabobank analyst Andy Duff explained. "It is possible that some growth may come from exports, but with declining global commodity prices, revenue growth would have to come from an increase in export volumes or a declining exchange rate or both."

In the case of soybeans, the outlook is for an increase in South American export volumes in 2014.

Brazil's soybean area in 2014 is estimated to be 7%, or 2 million hectares, larger than in 2013 as a result of favorable economics for soybeans versus corn. If trend-line yields are achieved, a harvest of 91 million metric tons is expected for the 2013-14 crop year, up from 81 mmt in 2012-13.

According to Rabobank's outlook, Brazil's export competitiveness has been at least partially offset by rising costs, especially in services and logistics. For example, diesel prices have risen three times since the beginning of 2013, with the most recent hike of 8% occurring at the end of November 2013.

Given the long distances between major crop production regions and the country's ports, Rabobank said sustained major investments in infrastructure over the coming years will remain pivotal if Brazil plans to expand or remain competitive.

"Although Brazil is slowly addressing its bottlenecks, this will take years," Duff noted. "For 2014, with higher fuel costs and another large grain harvest, logistics costs for Brazilian agribusiness are unlikely to decline."


Market recap

Daniel O'Brien, extension agricultural economist for Kansas State University Research & Extension, recently suggested that the upward movement in March 2014 corn futures since Jan. 21 has reflected both: (1) demand for exports, ethanol production and feed use induced by lower corn prices and (2) the continued unwillingness of many U.S. corn producers to sell their 2013 corn crop at current prices.

O'Brien said recent moderate strength in corn futures may be difficult to maintain through late February into March, especially if corn growers begin selling cash corn in earnest.

Nearby corn prices remained fairly steady following the holiday last Monday, and Tuesday's nearby price settled at $4.495/bu. March corn futures traded mostly higher and closed positive last Wednesday with the highest trade since Oct. 24.

According to Tom Leffler of Farm Futures, nearby contracts have traded and closed above the 100-day moving average for the past 10 sessions.

Leffler said resistance is now at $4.545/bu., the new February high; the October high was $4.62. Support is at $4.38, the 100-day moving average, followed by the 50-day moving average of $4.32, then in the area of $4.20 and then $4.0625, the contract and January low. Nearby corn prices last Thursday closed slightly higher at $4.5575.

Soybean prices had a strong start last week following the holiday as many contracts made new highs for the week, but according to Leffler, selling took over and caused nearby prices to close lower last Wednesday at $13.5425/bu., down from Tuesday's close of $13.61.

He said profit-taking seemed to have been behind the selling since news was nearly nonexistent that day. By Thursday's close, soybeans had gone up slightly to settle at $13.5825/bu.

Arlan Suderman, senior market analyst for Water Street Solutions, noted last week that rain in South America will continue to cause delays in all facets of production.

Ports have been receiving rain, which is interrupting operations, but the biggest concern is whether rains will continue to hinder the second-crop corn planting, which constitutes the bulk of Brazil's production.

Suderman said producers in South America need to get corn planted by early March in order for it to have the opportunity to pollinate.


Ingredient watch

Severe winter weather continued to cause problems within the dried distillers grains plus solubles (DDGS) market. The disruptions have even forced some ethanol plants to temporarily stop production and delay delivery by rail.

According to the U.S. Grains Council, the situation is influencing prices, and domestic markets have firm offers that have increased $5-10/mt in most locations for truck rates, while local prices at some facilities have increased as much as $25/mt on the spot market. The result is that February DDGS prices are presently trading higher than in the March forward time period.

Domestic DDGS buyers are struggling to meet their needs as a consequence of the winter weather — just when foreign buyers are showing increased interest in purchasing again.

Some have been surprised by export price levels that were $35-40/mt higher than previously reported as delays from winter weather have rippled through the entire logistical system.

Volume:86 Issue:08

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.