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What's Happening
in MarketMaxx?
July 22, 2008
Is it, in Yogi Berra’s words, déjà vu all over again?
Not much more than a decade ago, many growers were waiting on $5/bu.
corn to return. Growers hope that once magical price level isn’t
reached again, and that producers don’t wind up leaving too much
$7-corn unsold. Corn prices for all old- and new-crop futures markets
had dropped deep in the $6-plus range by Friday, off sharply from the
nearly $8 prices seen the first of the month. Soybeans were also taking
a beating on the board, dropping from the mid-$16/bu. level to the
mid-$14s. Unfortunately, depending on basis levels, corn’s $5 range
and beans outside the teens are getting seriously close.
Of course, good marketing moves can help offset price dips. The wild
price levels seen on our MarketMaxx Leaderboard below show how
the use of options trading can help secure elevated prices. The use of
put and call options can be risky and premiums can be high, but rewards
can be large if prices tumble. Hopefully this newsletter can provide
some insight as to which direction prices will go in the near and
distant future.
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MarketMaxx Leaderboard
(July 20, 2008)
Top 10 Leaders – Corn Contest
Howard Wilson, Marlette, MI, $8.68.14
Kent Borstad, Faulkton, SD, $8.30.74
Roy Sangmeister, Manhattan, IL, $7.96.4
Scott Odle, Linden, IN, $7.84
Greg Salac, Summerdale, AL, $7.77.9
Mary Holthaus, Decorah, IA, $7.72.45
Corey Brandau, Peotone, IL, $7.64.18
Thomas Salac, Robertsdale, AL, $7.40.83
Marcus Spotts, Nora, IA, $7.21.4
Debbie Hesse, Moses, WA, $7.20.32
Top 10 Leaders – Soybean Contest
Roy Sangmeister, Manhattan, IL, $22.07.79
Corey Brandau, Peotone, IL, $21.85.77
Steve Mercer, Kearney, NE, $17.26.4
Andy Bensend, Dallas, WI, $17.24.02
Ed Krelo, Elkville, IL, $17.07.1
Jeremy Svitak, Howells, NE, $16.59.47
David Hadrick, Faulkton, SD, $16.41
Terry Hiatt, Atlanta, MO, $16.39.88
Jim Spahr, Seward, NE, $16.26.3
Howard Wilson, Marlette, MI, $16.10.7
MarketMaxx Prizes
Go to www.MarketMaxx.net today and learn
all about the great prizes in the MarketMaxx contest. Grand prize for
the corn contest is a Gleaner R5 or A5 series combine (up to 100 combine
separator hours). The soybean winner will receive a year's use (not to
exceed 250 hours) of the choice of any PowerMaxx CVT-equipped AGCO RT or
DT series tractor.
Second prize for each contest is a complete computer system plus
software from Syngenta Crop Protection. Third prize in the corn contest
is a complete Leica mojoRTK auto-steer system from Leica Geosystems.
Third prize in the soybean contest and fourth prize in the corn contest
is a DICKEY-john mini GAC Plus handheld moisture tester.
Players are also encouraged to visit www.MarketMaxx.net and explore
numerous links to help you improve your marketing plan. There’s a
complete glossary to help you tweak your knowledge of the marketing
tools available and regular market commentary from Kevin McNew,
president of Cash Grain Bids. His review of corn and soybean basis
trends can help you get a glimpse of markets across the country.
Your MarketMaxx e-newsletter, which comes every two weeks,
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 throughout the
year.
Go to www.MarketMaxx.net and
check out the MarketMaxx forum, and look over the many great
prizes offered by our MarketMaxx sponsors.
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Market Commentary
Corn, Soybean Production Prospects Improving
By Darrel Good, University of Illinois Extension economist
Corn prices and, to a lesser extent, soybean prices have come under
pressure over the past two weeks. The weakness started with USDA’s
June Acreage report and continues as production prospects
improve.
USDA’s recent World Agricultural Supply and Demand Estimates
report for corn confirmed trends revealed in the June 30 Grain
Stocks report and general trade expectations. The forecast of feed
and residual use of corn during the current marketing year was reduced
by 100 million bushels, reflecting the larger-than-expected June 1
inventory, as well as a 30-million-bushel increase in projected feed and
residual use of wheat this summer. The forecast of ethanol use of corn
during the current year was reduced by 50 million bushels and the
projection of other processing uses was reduced by 15 million bushels.
In spite of a recent slowdown in weekly export inspections, the
projection of 2007-2008 marketing year exports was unchanged at 2.45
billion bushels. The unchanged forecast likely reflects the fact that
Census Bureau export estimates through May exceeded USDA’s cumulative
export inspections by 65 million bushels. Sept. 1 stocks are projected
at 1.598 billion bushels, 165 million above the June forecast.
For the 2008-2009 marketing year, the U.S. average corn yield is
forecast at 148.4 bu., based on a linear trend from 1990-2007 adjusted
for late planting and emergence and a smaller portion of harvested
acreage in the Corn Belt. The forecast is 0.5 bu. below the June
forecast. Production is forecast at 11.715 billion bushels. Consumption
forecasts were little changed from June, with a 50-million-bushel
increase in feed and residual use and a 65-million-bushel reduction in
food and industrial use.
Some believe that ethanol use of corn will not reach the USDA projection
of 3.95 billion bushels, but margins have improved significantly as a
result of the recent drop in corn prices. Year-ending stocks are
expected to be small at 833 million bushels, but 160 million larger than
forecast last month.
Generally favorable weather in recent weeks and a forecast of needed
precipitation in parts of the northern Corn Belt suggests that corn
production prospects are continuing to improve. Crop condition
ratings along with our crop weather yield model suggest that the U.S.
average yield could be 2-3 bu. above the USDA forecast if at least
average weather conditions persist.
The first yield forecast based on producer surveys and field
observations will be released on Aug. 12. Crop maturity is late enough
the yields will be difficult to estimate. However, the adjustments, if
any, to planted and harvested acreage estimates will be very important.
For soybeans, two changes were made in the projections of use
during the current marketing year. Exports are now projected at 1.145
billion bushels, 35 million larger than the June projection. The larger
projection likely reflects the ongoing strong pace of shipments and the
fact that Census Bureau export estimates through May exceed USDA’s
cumulative export inspection estimate by 29 million bushels.
For the 2008-2009 marketing year, the U.S. average soybean yield is
projected at 41.6 bu., based on 1989-2007 regional trend analysis
adjusted for late planting and emergence. That projection is 0.5 bu.
below the June forecast and when coupled with fewer acres revealed in
the June Acreage report, results in a production forecast of 3
billion bushels.
That forecast is 105 million below the June forecast. The projection of
use during the 2008-2009 marketing year was 67 million below the June
forecast, but the projection of year-ending stocks declined by 35
million bushels, to a total of only 140 million bushels.
Crop condition ratings and our crop weather model suggest that the U.S.
average yield could be a bushel above the USDA projection if summer
weather is near average and an early freeze is avoided. The lateness of
the crop and extensive replanting, however, makes yield prospects very
uncertain. The USDA’s yield estimate in the August Crop Production
report will be based an a very immature crop, but the acreage
estimate will be important.
There is a lot of growing season left, but current crop and weather
conditions suggest the possibility for further weakness in corn and
soybean prices in the near term.
Additional
Commentary
Fears Of Government Intervention Impact Markets
By Elaine Johnson, DEVO Capital analyst
Increased fear of government intervention to limit what has been called
excessive “speculation” in the commodity markets, especially crude
oil, triggered liquidation in many futures markets last week. There
were calls for increased margin requirements, stricter guidelines on
position limits, etc.
The end result of this was a wave of liquidation, but especially so in
the energy and grain markets. While improving crop conditions were
cited, much of the weakness seemed to be due to fund liquidation, which
got heavier as the week wore on as the technical picture continued to
erode.
December corn violated trend-line support and closed below its
100-day moving average for the first time since last October. The next
level of support is back at the April-May lows and March highs, in the
$5.90-6 area. The market has now
etraced the entire run based on the Midwestern flooding. When the
liquidation subsides, I would look for the market to rebound.
The wheat market remained in a rather narrow range this week, despite
the weakness in the corn market. The market may be telling us that the
bearish news is already factored into prices for now. Deterioration in
spring wheat crop conditions may have also helped support the market.
Conditions dropped 8% this past week and may deteriorate further early
due to dryness in parts of the northern plains.
This market remains vulnerable to spillover weakness from the other
grains, but it appears as though the recent lows may hold. Monitor this
market for a potential upside reversal.
So, what’s next? - asks Melvin Brees, University of Missouri
agricultural economist. “No one, of course, really knows. However,
at high price levels there is always significant downside price risk,”
he says. “Seasonal patterns and a number of market factors suggest
lower corn/soybean prices are possible.
“But corn and soybean supplies will be tight even with good growing
conditions for the rest of the growing season. The possibility of any
yield reductions from hot/dry weather offer market price support and the
possibility of more market volatility. Much of the crop was planted late
and crop progress is well behind average. This increases the risk of
early frost/freeze damage on a crop that needs all of the time it can
get.”
Brees says that although prices have slipped from their highs, new-crop
corn futures are at or above the top end of USDA’s projected price
range. “New-crop soybean futures prices remain well above USDA’s
estimated price range. USDA will provide the first surveyed look at 2008
production with the August supply/demand estimates,” he says. “Along
with changing weather forecasts, the market will anticipate the August
supply/demand projections and react to them after they are released.
“These will all provide clues for what is next. With downside price
risk, it will be important to watch market action for opportunities to
add to preharvest sales or establish price protection on grain going
into storage at harvest on weather rallies or new supply/demand
information,” says Brees.
Other News That Can
Impact Corn And Soybean Prices
St. Louis Fed Analyzes Viability Of Ethanol
While increasing our use of ethanol for fuel may make a small dent in
the demand for oil, the potential benefits must outweigh the potential
costs if ethanol is going to be viable in the long-term, say research
analyst Joshua A. Byrge and economist Kevin L. Kliesen in the July issue
of The Regional Economist, the quarterly journal of business and
economic issues published by the Federal Reserve Bank of St. Louis.
The environmentally friendly nature of ethanol, when compared to crude
oil, has been one of the major selling points used to increase its use.
Government officials and some analysts believe that burning ethanol in
place of gasoline has the potential to address global climate change by
decreasing greenhouse-gas emissions. Yet, one study claims that when the
environmental effects of land clearing for ethanol source crops are
taken into account, ethanol actually produces more carbon emissions than
standard gasoline.
The Fed quarterly says a second benefit used to popularize ethanol is
its ability to decrease U.S. dependence on foreign oil. Even if all the
corn grown in the U.S. were used to produce ethanol, however, it would
replace only 12% of the gasoline used for transportation. And this is
not expected to increase significantly anytime soon. "Even if the 2022
goals of the 2007 Energy Independence and Security Act are realized, the
36 billion gallons of ethanol will equate energetically to roughly 21
billion gallons of gasoline," say Byrge and Kliesen. "This would replace
only 15% of transportation fuel used in 2005."
The economists say that while producers are beginning to explore
switchgrass or cellulosic ethanol as a way to increase our use of
biofuels, there is serious concern about the virtually nonexistent
infrastructure to support it. Other questionable claims concern the
possibility that the rise in demand for corn – the primary ingredient
in ethanol – has led to increased food prices worldwide.
While the Fed authors assert that ethanol production may not be driving
the recent run-up, it does lead them to highlight the potential need to
reassess the U.S. tariff on ethanol for fuel production. At current oil
prices, ethanol production should be highly profitable even without the
ethanol tariff, and a reduction in the tariff could ease the effect of
ethanol's production on food prices, they say.
"Since alternative fuels are more expensive to produce than gasoline or
diesel, the long-term benefit from ethanol production depends on its
viability when compared to conventional fuels," conclude Byrge and
Kliesen. "If we see a repeat of the 1980s decline in oil prices, we
would likely see a considerable departure of economic resources from
ethanol production."
For more from the The Fed, go to www.stlouisfed.org/publications/re/default.html.
Entry Deadline Aug. 1 For 2008 National Corn Yield Contest
Aug. 1 is the cutoff date for entry forms for the National Corn Growers
Association’s (NCGA) 2008 National Corn Yield Contest. With harvested
corn acres expected to be the second-highest since the 1940s, growers
are encouraged to sign up now for this annual event that highlights the
success of their work.
“Last year, nearly 5,000 growers accepted the challenge to test their
corn-production skill and knowledge by competing with proven winners to
reach the ultimate goal of champion,” says David Ward, chairman of
NCGA’s production and stewardship action team. “We’re proud to
present this opportunity for our members to explore new ideas and
production techniques, while gleaning knowledge to enhance their future
yield potential.”
Grower leaders involved in the program stressed that entrants should be
aware of changes to the program for this year. “For those who have
accepted the challenge to compete in past contests, there are several
important changes to contest regulations,” says Matt Gibson, chairman
of NCGA’s grower services action team. “After each contest, a group
of NCGA corn growers review the contest rules and approve changes to
make the contest entry and harvest process less complicated while
maintaining integrity.”
For more information, to download forms or enter online, go to www.ncga.com/CYC/main/index.asp.
Dramatic Increases For Corn And Soybean Production Costs For 2009
The University of Illinois farmdoc center says costs for corn and
soybean production are projected much higher for central-Illinois farms
having high-productivity farmland.
For corn, non-land production costs for 2009 are projected at $529/acre,
a $141/acre increase from 2008 budgeted levels of $388. Between 2003 and
2007, non-land production costs averaged $286/acre. Production costs for
2009 are projected to be $243 higher than the 2003-2007 average, an
increase of 85%.
For soybeans, non-land production costs for 2009 are projected at
$321/acre, up by $82 over 2008 costs of $239. Between 2003 and 2007,
non-land costs for soybeans averaged $180/acre. Production costs for
2009 are projected to be $141 higher than 2003-2007 levels, an increase
of 78%. (Input prices, particularly for fertilizers, are uncertain and
could be different than those used in these budgets.)
Fertilizer is the input with the largest cost increase. For corn,
fertilizer costs in 2009 are projected at $215/acre, an increase of $97
over the 2008 projected level of $118/acre. For soybeans, fertilizer
costs in 2009 are projected at $98/acre, a $53 increase over the 2008
level of $45.
Fertilizer costs are based on projected prices of $1,000/ton for
anhydrous ammonia, $1,000/ton for diammonium phosphate (DAP) and
$900/ton for potash. (These prices were obtained by contacting
fertilizer supply firms; fertilizer prices varied across supply firms.)
Moreover, input prices may change into fall and spring, so prices
farmers pay will vary from those presented here, says farmdoc..
Additionally, fertilizer costs will vary across farms, as timing of
fertilizer purchase will impact price.
Projected 2009 fertilizer prices are significantly above fertilizer
prices in recent years. USDA surveys in 2003 say anhydrous ammonia
prices were $368/ton. Ammonia price rose to $536/ton in 2007, an
increase of $168 over 2003 levels. In 2008, ammonia was $769, a $233
increase over 2007 levels. The $1,000 price for 2009 represents a $231
increase over 2008 levels. If anhydrous ammonia is $1,000/ton in 2009,
ammonia prices will have increased $632 since 2003, a 171% increase over
the six-year period.
DOE To Help Fund Small-Scale Cellulosic Biorefinery Projects In
Wisconsin, Louisiana
U.S. Department of Energy (DOE) has announced the selection of two
small-scale cellulosic biorefinery projects in Park Falls, WI, and
Jennings, LA, for federal funding of up to $40 million over five years.
These projects will further President Bush's goal of making cellulosic
ethanol cost-competitive with corn-based ethanol by 2012 and help reduce
America's gasoline use by expanding the availability of alternative and
renewable transportation fuels.
"To meet our growing energy demand we must continue to research and
advance clean energy solutions to improve our energy security and reduce
greenhouse-gas emissions – and clean, sustainable cellulosic biofuels
do just that," says DOE Assistant Secretary Andy Karsner. "These
biorefineries will create fuel from non-food-based sources to power our
vehicles and reduce our dependence on foreign oil."
On average, commercial-scale biorefineries process roughly 700 tons or
more of non-food feedstock per day, with an output of approximately
15-30 million gallons a year (mgy) of biofuels. These smaller-scale
facilities will input approximately 70 tons of feedstock per day -- with
outputs ranging from 1.5 to 6 mgy. The selected small-scale projects
will produce liquid transportation fuels such as cellulosic ethanol from
wood, energy crops and agricultural waste products.
These two biorefinery projects are the final round of selections for
DOE's competitive small-scale biorefinery solicitation. Earlier this
year, DOE selected seven other projects, comparable in size and scope,
to receive up to a total of $200 million. With the addition of the two
new projects, the selected biorefinery projects will receive up to a
total of $240 million in DOE funding, subject to appropriations, over
the next five fiscal years. Once federal funding is combined with
industry cost share, more than $735 million will be invested in these
nine projects over the next four to five years.
The DOE announcement is part of more than $1 billion in investment that
DOE has announced for multi-year biofuels research and development
projects. These small-scale projects complement the department's
investment in commercial-scale biorefineries. The full-scale
biorefineries focus on near-term commercial processes, while the
small-scale facilities will verify integrated operations at a reduced
size with diverse feedstocks using novel processing technologies.
Argentinian Senate Rejects Controversial Grain Export Tax Package
The Associated Press reports that Argentina's Senate has rejected
a controversial grain-export tax package early, dealing a blow to the
government on a key issue that has led to nationwide farm strikes and
regional food shortages. Lawmakers voted against the government-backed
bill 37 to 36 following 17 hours of debate. Voting was tied until Vice
President Julio Cobos, who is also leader of the Senate, broke the
deadlock with a deciding ballot.
Argentina has become an important competitor with the U.S. in corn and
soybean production and exports. President Cristina Fernandez decreed a
more than 10% sliding-scale increase in export taxes on soy and other
grains in March, in a bid to trap farm products on the Argentine market
and drive down prices. Cobo's vote could unleash a political crisis in
the government. The vice president belongs to the Radical Civic Union
party that has traditionally opposed the Peronist party headed by
Fernandez.
The proposed measure led to a major confrontation between the government
and the agricultural sector, one of the most powerful economic blocs in
Argentina. Farmers launched strikes and roadblocks to protest the
measure, forcing the president to agree to submit the tax package to a
vote in congress. He agreed to form part of former president Nestor
Kirchner's presidential framework to increase its political popularity.
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New Agribusiness Job
Web Site
If you need good agribusiness employees or if you’re
looking for a new position, then go to www.agribizjobs.com/home/. Penton
Media’s Ag Group, of which Corn & Soybean Digest is a member,
has a new targeted online career center. Agribizjobs.com 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
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when new positions are posted that match their search criteria. The
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job-seekers to list their experience and qualifications in a protected
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Updated Marketing,
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 new farm bill
regulations, 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.
MarketMaxx is a biweekly e-newsletter for registered
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