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What's Happening
in MarketMaxx?
July 8, 2008
Fireworks Continue In Corn And Soybean Markets
While the nation celebrated Independence Day last week, there was no
freedom from price volatility, especially following the June 30 USDA
revised acreage and stocks reports.
After immediate sharp downward trends, July Chicago Board of Trade
(CBOT) corn closed the holiday week at $7.46/bu., September ended at
$7.57 and December was a jackpot-looking $7.77. At the close of the
market yesterday – all were off by 30 cents.
In soybean futures, August closed at $16.49/bu., September closed at
$16.37 and November ended the week at $16.41. Every CBOT soybean
contract through September 2009 was above $16 last week. But after the
close yesterday, nearly all were off by 70 cents and none were over $16.
Much of yesterday's drop in prices was likely caused by the U.S. corn
crop being rated 62% good/excellent as of July 6 by USDA. That's up from
61% a week earlier, but below the 70% rating of a year earlier. Soybean
conditions were rated 59% good/excellent, up from 58% a week earlier,
but down from 65% a year earlier.
Market economists provide their analysis of the USDA reports below in
the Market Commentary newsletter segment. From the projections
they have, astute marketing will continue to be essential in the months
ahead. If historical price trends come about, then lower corn and bean
prices may be here soon. However, normal price trends have been anything
but that the past two years – even more reason to have your marketing
skills at their best. The current MarketMaxx Leaderboard
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Top 10 Leaders – Corn Contest
Terry Hiatt, Atlanta, MO, $9.73.65
Howard Wilson, Marlette, MI, $9.60.55
Roy Sangmeister, Manhattan, IL, $9.50.82
Janice Good, Medina, OH, $9.49.51
Dale Good, Medina, OH, $9.47.26
Mary Holthaus, Decorah, IA, $9.23
Ron Falk, Monticello, IL, $9.20.01
Corey Brandau, Peotone, IL, $9.18.44
Arlin DePatis, Walnut, IL, $9.14.41
Scott Odle, Linden, IN, $9.10.07
Top 10 Leaders – Soybean Contest
Roy Sangmeister, Manhattan, IL, $23.39.04
Corey Brandau, Peotone, IL, $23.30.82
Terry Hiatt, Atlanta, MO, $19.54.8
Steve Mercer, Kearney, NE, $19.08.93
Arlin DePatis, Walnut, IL, $18.85.5
Janice Good, Medina, OH, $18.62.8
Andy Bensend, Dallas, WI, $18.57.88
Dale Good, Medina, OH, $18.47.67
Jeremy Svitak, Howells, NE, $18.41.4
Howard Wilson, Marlette, MI, $17.99.4
MarketMaxx Prizes
MarketMaxx sponsors are providing a host of big
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The soybean winner will receive a year's use (not to exceed 250 hours)
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Second prize for each contest is a complete computer system plus
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Third prize in the soybean contest and fourth prize in the corn contest
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Players are encouraged to visit the www.marketmaxx.net/ Web site and
take advantage of information provided by our sponsors. There are also
numerous links to help you improve your marketing plan, including a
complete glossary to help you tone up your knowledge of marketing tools
available and regular market commentary from Kevin McNew, president of
Cash Grain Bids. His review of corn and soybean basis changes can help
you get a glimpse of markets across the country.
This MarketMaxx e-newsletter features the latest market
commentary from leading university and private grain marketing
specialists -- information you can use to enhance your corn and soybean
marketing program. You can track leaders in the game and measure your
selling prices against theirs. The newsletter will continue to
arrive in your e-mail inbox every other week through the duration of
MarketMaxx on Oct. 31, 2008 and beyond.
Go to www.marketmaxx.net/ and
check out the MarketMaxx forum. And look over the many great
prizes offered by our MarketMaxx sponsors.
Market
Commentary
Economists React To USDA’s Revised Acreage Report
… Corn Acreage Somewhat Surprising
By Melvin Brees, University of Missouri agricultural economist
USDA's June 30 acreage report indicated that producers planted more corn
acres and somewhat fewer soybean acres than were intended last March.
The early June survey was conducted before most of the recent flooding
occurred. But 1,200 producers in the flooded areas were re-interviewed
and the results used to adjust expected harvested acres.
Corn estimated planted acreage is 87.3 million acres. This is within the
pre-report range of trade estimates (79.6 - 87.4 million acres), but
above the average pre-report expectation of 85.3 million acres and the
March intentions of 86 million acres. While this planted acreage is down
from last year's 93.6 million acres, it is the second largest planted
acreage since 1944.
Harvested acreage projections were adjusted due to the flooding. Farmers
are expected to harvest 90.4% of the planted acres of corn compared to
the expectation of 92.4% measured in the early June survey. This results
in expected corn harvested acreage of 78.9 million acres. In spite of
the adjustments for flooding, this is slightly higher than previous
estimates of 2008 harvested corn acres.
Soybean planted acreage is estimated at 74.5 million acres. This is
within the range of pre-report trade estimates (71.9 - 76.0 million
acres) and slightly above the average pre-report expectation of 74.2
million acres. However, it is somewhat below the March intended planted
acreage of 74.8 million acres.
Harvested soybean acreage is projected to be 72.1 million acres. This
represents a 15% increase over last year's harvested acreage, but is
less than the March projection of 73.8 million harvested soybean acres.
All wheat acreage is estimated at 63.5 million acres. This is near the
bottom of pre-report trade estimates ranging from 63.5 to 64.0 million
acres. USDA's Quarterly Grain Stocks Report suggests corn and soybean
demand remains strong. However, although both corn and soybean stocks
were within the ranges of pre-report expectations, they were somewhat
higher than the average pre-report stocks expectations. Most analysts
will continue to watch closely for signs that demand may be slowing due
to high prices.
The acreage numbers are not final. The impacts of the flooding,
replanting and prevented planted acres will be re-evaluated in upcoming
reports. Late planting, weather during the remainder of the growing
season and the resulting yield potential will continue to be important.
However, the corn acreage number is likely a surprise to many and may
signal bearish news.
… Reports Bearish To Corn
Darrel Good, University of Illinois grain marketing specialist, says
taken together, USDA’s revised reports were negative for corn prices.
With the slow-down in use now being experienced, year ending stocks will
likely be at least 100 million bushels larger than the 1.433 billion
bushels projected by USDA earlier in the month.
In addition, the acreage estimate suggests there may need to be less
rationing next year than previously thought, although stock levels will
still likely decline during the 2008-2009 marketing year. For soybeans,
however, production may fall short of the 3.1 billion bushels projected
earlier by USDA, keeping stocks extremely tight for another year. For
the next two months, prices will be all about U.S. weather.
…Can Ethanol Cope With High Prices?
Chris Hurt, Purdue University Extension agricultural economist, asks
that question following the June 30 reports. Inexpensive and
abundant corn helped move the ethanol industry onto the alternative
fuels fast lane. With corn prices now at record highs, demand outpacing
supply and crop losses inevitable with the Midwest floods, ethanol
production could soon be stalled, he says.
As corn prices continue climbing, fewer ethanol producers can afford the
feedstock, says Hurt. In turn, domestic livestock producers and foreign
buyers are finding it more difficult either to pay the high prices or
obtain the grain they need.
"The ethanol industry is struggling to pay for corn that has reached the
$7/bu. level," says Hurt. "So the ethanol industry may also experience
losses and might not be able to bid the price. That will depend on what
oil prices and, therefore, ethanol prices, are. Everybody is trying to
evaluate how many bushels of corn we have lost because of
weather-related damage, what the implications are for prices and who can
pay these high prices. The answer today is that hardly anyone can pay
these kinds of prices and still have positive margins."
Hurt says the summer floods could reduce production even more than
forecasters believe. Using a similar 1993 Midwest flood as a model, he
estimates that U.S. corn production could drop below 11 billion bushels
this year, not nearly enough corn to go around.
For starters, the U.S. ethanol industry needs 4 billion bushels of corn
this year -- or 1 billion bushels more than 2007 -- to meet anticipated
production, says Hurt. Also, livestock producers used 6.15 billion
bushels and foreign buyers 2.45 billion bushels of U.S. corn in 2007,
and both could buy at least that much corn this year, if it were
available and more favorably priced.
Usage will have to come down and it likely will come from the livestock
and foreign sectors. "The USDA has said that if the ethanol industry
gets 1 billion more bushels of corn, it means that the domestic
livestock industry will have to cut back 16% in feeding corn," says
Hurt. "And then our foreign buyers will have to cut back 18%."
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Additional
Commentary
River Woes Continue To Pressure Grain Basis
By Kevin McNew, president, Cash Grain Bids
Barge rates continued to move higher along the Mississippi River and
other systems last week. Corn Belt river systems posted nearly
10-cent/bu. increases in barge rates as swollen rivers continue to hold
barge traffic to a limit.
At the Louisiana Gulf Coast, basis levels were mixed with corn basis
gaining ground while soybean basis came under pressure. Export sales
continue to be strong for both corn and beans. Last week’s export
report showed numbers well above trade expectations. Weekly corn sales
came in at 668,100 million tons (mt), which were above the high end of
expectations of 600,000 mt. Soybean sales of 642,400 mt were well ahead
of trade guesses which topped 450,000 mt.
Corn basis on average across the U.S. was mostly unchanged. However,
sections of the lower Midwest and South had gains of 2 cents or more for
the week, while northern sections were mostly unchanged to weaker.
For soybeans, basis levels were weaker along the Mississippi, thanks to
higher barge rates and losses in basis at the Gulf. However, areas not
impacted by the river had gains of 3 cents or more. For detailed maps of
how basis performed in your area, go to www.marketmaxx.net/commentarybasis.asp?s=2008-07-03.
Other News That Can
Impact Corn And Soybean Prices
NCGA Welcomes Positive Corn Acreage, Stocks
Reports
The National Corn Growers Association (NCGA) welcomed the news that U.S.
corn growers have planted more corn acres than projected by USDA in an
earlier report. At 87.327 million acres, planted corn acreage is
approximately 1.3 million acres above the agency’s March Prospective
Plantings report.
“This extra acreage has helped protect our corn supply at a time when
flooding has threatened the industry,” says Ron Litterer, NCGA
president and a grower from Greene, IA. “We’re happy that growers
have exceeded the March expectations and we know that they will work
hard to provide a good harvest in the fall, to help meet all food, feed
and fuel needs.” Litterer notes that USDA made a special effort to
re-interview farmers in the flood-impacted areas to analyze planting
intentions.
Uproar Against RFS Continues
The Brock Report points out that a group of 50 Republican
lawmakers, led by the former chairman of the House Agriculture
Committee, last week sent a letter to the Environmental Protection
Agency (EPA) asking for a reduction in the federal renewable fuels
mandate for 2009 in order to help livestock producers and grocery
shoppers.
“There are many factors that have increased the price of corn, but the
only factor that we can immediately control is the amount of the corn
supply that must be dedicated to meet the RFS (Renewable Fuels
Standard),” said Rep. Bob Goodlatte (R-VA). "Our livestock producers
and the American consumer have been hit hard in the pocket books. I
support the development and use of alternative fuels; however, we cannot
allow government mandates to pick winners and losers. A temporary waiver
will offer immediate relief to those affected by the current shortage of
the corn supply."
EPA is due to decide by late July on a request by Texas Gov. Rick Perry
for a 50% reduction in this year's mandate to use 9 billion gallons of
renewable fuels. The government estimates that roughly one-third of this
year's corn crop will be used to make ethanol.
It is debatable whether reducing the renewable fuels mandate would have
any significant impact on ethanol production, The Brock Report
says. U.S. ethanol production capacity has already exceeded the
9-billion-gallon level with more ethanol plants scheduled to open in
coming months. Ethanol is priced far enough below the wholesale price of
gasoline to give fuel blenders ample economic incentive to blend ethanol
in their gasoline without the renewable fuels mandate.
August wholesale gasoline futures on the ICE commodity exchange were
priced at about $3.50/gal. early last week, while August CBOT ethanol
futures settled at $2.86/gal. Blenders would also still use ethanol to
comply with the 1990 Clean Air Act, which requires the use of
oxygen-boosting additives (oxygenates) in gasoline sold in areas with
unhealthy levels of air pollution. Ethanol has become the predominant
oxygenate in the past several years since the widely used oxygenate MTBE
was found to be a groundwater contaminant.
Scott Shearer, a Washington correspondent for Beef magazine,
notes that organizations are lining up for and against the RFS waiver
request. Organizations filing comments in support of a waiver include:
State of Texas, Environmental Working Group, Grocery Manufacturers of
America, National Chicken Council, National Pork Producers Council,
National Cattlemen’s Beef Association, National Petrochemical Refiners
Association, and the National Restaurant Association.
Among the organizations filing comments opposing the waiver are:
American Farm Bureau Federation, National Association of State
Departments of Agriculture, National Association of Wheat Growers,
National Biodiesel Board, National Corn Growers Association, National
Farmers Union, National Sorghum Producers, American Coalition for
Ethanol, Association of Equipment Manufacturers and Renewable Fuels
Association.
World Bank Report Adds Fuel To Anti-Biofuels Fire
Soyatech and COMTEX News Network report from London that a
secret World Bank report has shown that biofuels have forced world food
prices up by 75%, disputing U.S. claims that higher demand from India
and China has led to higher food prices.
The report, reviewed in The Guardian newspaper, was completed in
April and obtained by the newspaper. It reportedly is based on the most
detailed analysis of the food crisis conducted by Don Mitchell, a senior
economist with the World Bank. "Rapid income growth in developing
countries has not led to large increases in global grain consumption and
was not a major factor responsible for the large price increases," says
the leaked report.
The 75% figure sharply contradicted the claims by the U.S. government
that biofuels contribute less than 3% to food price hikes. The report
argues that the European Union EU and U.S. drive for biofuels has put by
far the biggest impact on food supply and prices.
Make Your Own Biodiesel
On-farm biodiesel production is one way to offset the high cost of the
vital fuel. And the Louisiana State University AgCenter is hosting
workshops to help producers brew their own.
“It takes 48 hours to make a batch of 25-30 gallons of biodiesel,”
says Bill Carney, director of the LSU Callegari Center. “We will make
a batch as part of this series of workshops.” Carney says it takes a
minimum investment of $800 in equipment to make batches of 25 to 30
gallons.
The workshop dates are July 29, 30 or 31 at the W.A. Callegari
Environmental Center in Baton Rouge. “We had standing room only at our
workshops in June,” says Carney. “This set of workshops will follow
the same format with presentations, demonstrations and time for
questions and answers.”
The workshops are free, but registration is required. Attendees can
register on the Internet by going to biodiesel.eventbrite.com.
Information about getting the equipment and supplies and with the steps
involved in biodiesel production will also be available. The LSU
AgCenter will also host a series of advanced workshops on biodiesel
production in the fall.
New
Agribusiness Job Web Site
Looking for a job or in need of agribusiness employees?
Then go to www.agribizjobs.com/home/.
Penton Media’s Ag Group, of which Corn & Soybean Digest is a
member, has launched a new targeted online career center.
Agribizjobs.com -- www.agribizjobs.com/home/
offers industry employers a growing, qualified audience of ag
professionals and industry job-seekers with agribusiness-specific,
categorized job listings. It’s a joint effort by Corn & Soybean
Digest and its sister publications, BEEF, Farm Industry News,
Farm Press, Hay & Forage Grower and National Hog Farmer.
At www.agribizjobs.com/home/
employers can view complete but anonymous resumes for free, and pay only
to connect with a job-seeker. Job-seekers can post resumes in
ag-specific employment categories and sign up to receive e-mail alerts
when new positions are posted that match their search criteria. The
site’s Anonymous Resume Bank enables both active and passive
job-seekers to list their experience and qualifications in a protected
environment, allowing them to stay connected to the employment market
while maintaining full control of their confidential information.
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Updated Marketing,
Farm Bill, Biofuels And Other News At Corn & Soybean Digest Web
Site
Follow the latest analysis of corn and soybean futures
prices and market trends at www.cornandsoybeandigest.com
-- our flagship Web site. There’s information on the farm bill, market
commentary and lots of other news you can use to better manage your
farm.
If your latest issue of Corn & Soybean Digest magazine isn’t
handy, the site’s magazine archives section enables you to access it
and past issues to revisit subjects that can impact your corn and
soybean production and marketing. The site's news from across the Corn
Belt, other corn- and soybean-production areas and the worldwide markets
for corn and beans can help you stay on top of events that can help or
hurt prices.
Go to www.cornandsoybeandigest.com
now and stay up-to-the-minute on the timeliest analysis and other
information on corn and soybean production and prices.
Subscribe
To These Other E-Newsletters from Corn & Soybean Digest
There are several other e-newsletters from Corn &
Soybean Digest. They include F.I.R.S.T. Harvest Reports
(seasonal), Corn E-Digest, Soybean E-Digest and Crop News Weekly.
Check them out at subscribe.cornandsoybeandigest.com/subscribe.cfm?tc=NLSUB.
Thanks for taking time to review this MarketMaxx newsletter. If you have
comments or questions about MarketMaxx, e-mail your editor, Larry
Stalcup, at beef2lar@suddenlink.net.
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