Grain prices may not get needed boost from exports

first_imgShare Facebook Twitter Google + LinkedIn Pinterest Grain prices during the month of January did little to encourage the bulls. They are holding hard and fast to their 2015 corn as they expect $4 or more yet to come this spring. Likewise those holding 2015 soybeans would like at least $9.50. Corn basis levels remained extremely flat as well during January. A western Ohio ethanol producer reached March plus 36 during the first week of January. By the end of the month, the basis had declined 7 cents to March plus 29. If corn continues to move out of bins in February, we could see additional basis jumps pushed back to near spring planting time.In bearish corn years of the past, we have seen four well-defined price cycles according to Steve Freed at ADM Investor Services. In the past, cycle lows have taken place in February, followed by cycle highs in April, cycle lows during spring planting in May, then finished by highs in July during pollination. It is possible to see 50-cent swings during those four periods. It is indeed something to pay attention to as many are expecting corn to continue to have great difficulty reaching above the $4 mark. Some think corn could fall to $2.90 by year’s end.Declining corn and soybean prices played a huge role in U.S. farm income falling from $120 billion in 2013 to nearly $60 billion in 2015. Land rents were driven higher during the prosperous years from 2008 to 2013 when returns per acre reached historic levels. Cash rent battles pitted farmer against farmer in the desire to farm more acres. Cycles have highs and lows and, at the time, each extreme feels like it could last forever.Further complicating cash rent levels have been the property tax bills of at least the past three years. Landowners have seen property tax bills double or even triple. Ohio’s current structure of determining agricultural property taxes is based in part on crop values years in the past. It will certainly create much discussion in the years to come. Producers and landowners are alike in that their bills can move higher when income does not.U.S. corn exports are currently pegged by USDA at 1.7 billion bushels with the January supply and demand report down 50 million bushels from the previous report. Some have already anticipated corn exports could drop to 1.6 billion bushels in coming months. Why the pressure on U.S. corn exports when they totaled 2 billion bushels or more years ago? Argentina and Brazil are growing more corn in than they did in 2005. They will be exporting more corn in the years to come. In fact, with the election of Argentina president Marci last fall, some are already expecting Argentina to become a powerhouse grain exporter. They have the ability to export 9 million tons each month of grains that include corn, soybeans, and wheat. The U.S. will have great difficulty reaching those export levels seen in the past.From 2005 to 2015 major world crop acres increased by 174 million acres. Those additional acres provided even more production to compete with the U.S. While the U.S. farmers enjoy the great advances that took place in technology and seed genetics, that combination pushed yields higher and higher. In addition, those yield increases were not solely limited to the U.S. During those years world corn acres increased 78 million acres, including a jump of 6 million U.S. corn acres. World soybean acres rose 72 million acres with 11 million of those acres in the U.S. World corn and soybean acres rose a total of 150 million acres in that total increase of 174 million acres.In the next eight weeks traders and producers will see several projections of corn and soybean acres for 2016. The March 31planting intentions report will set the tone for at least two months. The record El Niño currently entrenched in current weather patterns could easily provide a dry weather extreme for the northern one third of the U.S. Corn Belt.last_img

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