Gregory Meyer reported yesterday at The Financial Times Online that, “US grain silos are bulging with the most corn on record after last year’s huge harvest, adding to the drag on commodities markets suffering weakness from agriculture to oil.
“Government statisticians counted 11.2bn bushels (285m tonnes) of corn stocks in domestic storage as of December 1, up 7 per cent from a year earlier, the US Department of Agriculture said on Monday. The figure was slightly above a market expectation of 11.123bn bushels and Chicago grain futures fell.
“The US is the world’s biggest producer of corn, used in products from pig feed to ethanol fuel. A record crop of 14.2bn bushels last autumn has served to rebuild low inventories after several years of erratic weather. Ample stocks tend to damp market volatility, as consumers feel comfortable they will not run out of supply.”
Mr. Meyer indicated that, “CBOT March corn dropped 0.6 per cent to $3.98 a bushel after the USDA released the closely watched stocks report and a handful of others tracking crop production and demand. CBOT March soyabeans fell 2.8 per cent to $10.21¾ a bushel, while CBOT March wheat declined 1.2 per cent to $5.56¾ a bushel.
“The US is also the largest producer of soyabeans. Stocks of the oilseed, used in vegetable oil and animal feed, rose 17 per cent year-on-year to 2.5bn as of December 1, after farmers hauled in a record 3.97bn-bushel crop last year, the USDA said.
“Despite the huge crops, futures have rallied since October in part due to strong demand for the grains. The USDA projected US animal feeders will use 5.275bn bushels of corn this year, down slightly from an estimate but higher than previous years. The agency estimated that ethanol refiners would use 5.175bn bushels of corn, the most ever despite regulatory uncertainty surrounding Washington’s biofuels blending mandate.”
Note that a complete summary of U.S. corn supply and demand variables from yesterday’s World Agricultural Supply and Demand Estimates (WASDE) report is available here; the WASDE report also indicated that, “The projected range for the season- average corn farm price is raised 15 cents on each end to $3.35 to $3.95 per bushel.”
Jesse Newman and Tennille Tracy reported in today’s Wall Street Journal that, “U.S. soybean prices tumbled 3.6% on Monday, marking their largest one-day drop for a front-month contract since August, as the Agriculture Department said the record 2014 harvest was even larger than expected and forecast higher supplies this year than analysts anticipated…[T]he USDA, in a closely watched series of reports, said U.S. farmers produced 3.969 billion bushels of soybeans last year on yields of 47.8 bushels an acre. Both estimates broke records and came in at more than analysts’ expectations thanks to the near-perfect growing conditions seen across much of the U.S. Midwest last season.”
A summary of U.S. soybean supply and demand variables from yesterday’s WASDE report can be found here; the report indicated that, “The 2014/15 U.S. season-average farm price for soybeans is projected at $9.45 to $10.95 per bushel, up 20 cents at the midpoint based on prices reported to date.”
University of Illinois agricultural economist Darrel Good provided an overview of yesterday’s USDA reports at the farmdoc daily blog (“USDA Reports to Support Corn Prices”) and concluded that summary by noting that, “Taken together, the reports are slightly supportive for corn prices and slightly negative for soybean prices. However, the nearly two million acre reduction in winter wheat seedings may point to another large increase in soybean acreage in 2015. For now, prices of corn and soybeans will reflect the ongoing pace of consumption, with corn prices likely to average in the upper half of the USDA’s projected range and soybeans in the lower half of the projected range.”
Note also that the University of Illinois is offering a free webinar this morning (“Outlook for Corn and Soybean Prices Following the USDA’s 2014 Final Production and December 1 Stocks Estimates”) by Darrel Good, Professor Emeritus and John Newton, Clinical Assistant Professor.
AP writer David Pitt reported yesterday that, “Farmers set new corn and soybean records last year, harvesting the largest crops ever as a cool summer allowed the plants to mature under mostly favorable conditions.
“The abundance has kept commodity prices low, however, meaning many farmers will struggle to make a profit this year, especially if they’re paying high rent for land.”
Yesterday’s article pointed out that, “It’s the farmers who have aggressively added rental land in recent years, locking in higher rents in hopes prices would remain high, who may struggle to make a profit, said Chad Hart, an agricultural economist at Iowa State University.
“‘Those who own their land outright are probably still profitable today and those who have enjoyed stable long-term lower cash rental agreements are still probably profitable,’ Hart said.”
And a news release yesterday from the American Farm Bureau Federation stated that, “One area representing more promise for corn and soybeans is feed demand from both the domestic and international livestock sectors.
“‘We’re going to have a lot more animals out there and more need for feed,’ [Patrick Westhoff, director of the Food and Agricultural Policy Research Institute] said.
“On the other hand, the biofuels sector is expected stagnate, and may perhaps be even weaker.”
Yesterday’s release added that, “Westhoff said large corn and soybean crops will weigh on grain and oilseed prices in the short run, and that although average corn prices remain low by 2007-2012 standards, they are still above pre-2007 levels.
“In closing Westhoff remarked, ‘As always, weather, oil prices and other factors will drive annual swings in prices.’”
Also yesterday, the National Oceanic and Atmospheric Administration provided an overview of California drought issues which noted that, “Regardless, the rain/snow needed to reduce deficits that developed over the past four years is a lot to ask of Mother Nature; much more than a couple of storms are capable of providing. The current drought is likely to linger into the summer dry season, even with the tremendous amount of water that has already fallen so far this winter.”
Also note that the National Drought Mitigation Center posted a report yesterday titled, “How the 2012 central U.S. drought evolved from the floods of 2011: A state-by-state assessment.”
In other news, Kelsey Gee reported yesterday at The Wall Street Journal Online that, “China banned imports of U.S. poultry and eggs following the detection of avian flu in noncommercial flocks in the U.S. late last year, according to a U.S. poultry-industry group.
“The ban follows the discoveries last month of a strain of H5N8 influenza in wild birds and in a so-called backyard flock of guinea fowl and chickens in Oregon, as well as the detection of another strain in California and Washington. The cases were confirmed by the U.S. Department of Agriculture.
“China’s ban affects shipments of breeding stock, including live chicks and hatching eggs, as well as poultry and eggs, according to the USA Poultry and Egg Export Council on Monday. The group criticized China’s decision, saying the bird flu outbreaks in the U.S. have occurred far away from the major U.S. commercial poultry-production regions.”
In other trade related news, Reuters news reported yesterday that, “Disagreements about food safety and farming are not likely to stand in the way of a free-trade agreement between the European Union and the United States, Germany’s farm minister told Reuters on Monday.”
The article indicated that, “[Minister Christian Schmidt] downplayed concerns that U.S. farm products such as genetically modified organisms (GMOs) and chlorine-treated chicken meat could gain new access to European markets.
“‘Some people want to convince the population that the TTIP only consists of chorine chicken and GMOs,’ he said. ‘This is false and misleading.’”
A news release yesterday from USDA stated that, “[Secretary Tom Vilsack] today announced that more than 23,000 of the nation’s dairy operations – over half of all dairy farms in America – have enrolled in the new safety-net program created by the 2014 Farm Bill, known as the Margin Protection Program. The voluntary program provides financial assistance to participating farmers when the margin – the difference between the price of milk and feed costs – falls below the coverage level selected by the farmer.”
House Ag Committee ranking member Collin Peterson (D., Minn.) commended on this development yesterday and noted that, “The Margin Protection Program will help dairy farmers better manage the risks associated with dairy production and help alleviate dramatic consumer price fluctuations at the grocery store. I am pleased so many producers took the time to learn about the new safety net and chose to enroll in the program. I hope that USDA will continue their outreach and education efforts so more producers can learn about the protection this program provides.”
A separate USDA update from yesterday stated that, “[USDA] Deputy Secretary Krysta Harden today announced the availability of more than $18 million in funding to help educate, mentor and enhance the sustainability of the next generation of farmers. This support is available through the Beginning Farmer and Rancher Development Program (BFRDP), administered by USDA’s National Institute for Food and Agriculture (NIFA).”
Meanwhile, a news release yesterday from Sen. Chuck Schumer (D., N.Y.) stated that, “Today, at Albany Distilling Company, [Sen. Schumer] launched his push to establish a crop insurance program for Capital Region farmers who grow malt barley, a crop that is crucial to the continued growth of the area’s burgeoning craft beer and distilling industries. Schumer explained that there currently is no federally backed insurance coverage for malt barley in New York State, even though farmers in other states do have coverage, which severely hampers the ability of local farmers to grow the amount of malt barley needed to meet the demand of local craft brewers and distillers. Schumer noted that multiple farms in the Capital Region are already growing malt barley and providing it to a number of local brewers and distillers, but malt barley needs very specific conditions to grow and severe weather can completely knock out an entire crop. Therefore, Schumer urged the U.S. Department of Agriculture (USDA) to expand its malt barley crop insurance program to include New York State. He also called on the USDA and the federal Small Business Administration (SBA) to educate local malt barley farmers on federal financing options that will help them scale up and add equipment and facilities like on-site barley storage.”
House Ag Committee member Dan Newhouse (R., Wash.) indicated in a recent column that, “My day-to-day experience as a state legislator and at the helm of the state Agriculture Department has been to listen to the needs of taxpayers, streamline government and find solutions to the challenges we face…[A]s a farmer, I understand firsthand the central importance of increasing water storage and harnessing the renewable energy provided by our rivers. For farmers and businesses in Central Washington, access to water provides the foundation for our economy.”
Rep. Newhouse added that, “Another key challenge for farmers, businesses, and landowners in the 4th District is burdensome federal land-use regulations. I support reforming the Endangered Species Act and keeping the Environmental Protection Agency within bounds so that the law works for the benefit of, and not against, both protected species and taxpayers.”
Meanwhile, Chris Clayton reported yesterday at the DTN Ag Policy blog that, “There doesn’t seem to be an easy fix for the U.S. in getting around its Country-of-Origin Labeling problem with Canada.”
Mr. Clayton noted that, “Speaking at the AFBF meeting, Vilsack it is difficult to come up with an effective labeling program for country-of-origin without segregating livestock. Yet that’s the area of the USDA rule that hit a stumbling block with the World Trade Organization. The WTO says segregating Canadian and Mexican livestock essentially leads to discriminatory practices against producers from those countries.
“‘I’m not between a rock and a hard spot where Congress told me to do one thing and the WTO tells me I can’t do what Congress told me,’ he said.
“A funding bill passed in in December requires USDA to bring back to Congress a proposed fix by May 1. Vilsack told members of the Iowa Farm Bureau on Monday at a breakfast discussion that Congress needs to come up with a fix for the law.”
Tim Barker reported this week at the St. Louis Post-Dispatch Online (“Genetically-modified wheat is in the works again, but are we ready for it?”) that, “At the heart of Monsanto’s global research operation is a structure with a rather ordinary name. But on the fourth floor of Building GG is a room where the future of wheat may be changing.”
The article noted that, “The supporters tout the work being done at the Chesterfield Village Research Center as critical to feeding a growing global population, while the critics say the world isn’t ready for the genetic modification of a dinner table staple.
“For Creve Coeur-based Monsanto, it is an expensive and time-consuming quest. It costs $150 million or more to add just one new genetic trait to a seed. Add a long development timeline — including field trials and regulatory approvals — and it could be another decade before the company is ready to put its new wheat seeds in farmers’ hands.”
Rebecca Shabad reported yesterday at The Hill Online that, “The GOP-led House Rules Committee late Monday advanced a bill to the floor that would fund the Department of Homeland Security through September and several amendments that would roll back President Obama’s immigration policies.
“The House will likely vote on each of the amendments and the spending bill on Wednesday. The GOP-sponsored amendments are expected to be adopted and wrapped into the spending bill.”
And, Seung Min Kim reported yesterday at Politico that, “It’s official: The White House issued a veto threat Monday on the House GOP plan to use funding for the Department of Homeland Security to fight President Barack Obama’s immigration policies.”
The Rules Committee yesterday also passed a measure relating to H.R. 185 – the Regulatory Accountability Act of 2015.
Tim Devaney reported yesterday at The Hill Online that, “The White House is threatening to veto legislation designed to curb some of the Obama administration’s most costly regulations.
“The House is expected to vote as early as Tuesday on the Regulatory Accountability Act of 2015.
“While the legislation is expected to easily pass, the White House warned the bill would ‘undermine’ federal regulators with ‘unnecessary procedural steps that seem designed simply to impede the regulatory development process.’”
Christopher Doering reported this week at The Des Moines Register Online that, “Excessive regulation by the federal government threatens the viability of farming and ranching, the head of the country’s largest farm group said Sunday.
“Bob Stallman, president of the American Farm Bureau Federation, used much of his speech to more than 4,500 people at the group’s annual convention to warn of a barrage of regulations from the government.”
And, Michael R. Crittenden reported yesterday at The Wall Street Journal Online that, “Four-and-a-half years after Democrats in Congress enacted the Dodd-Frank law to stiffen regulation of Wall Street, the two parties are again clashing over government regulation of financial markets.
“The Republicans who now control Congress want to roll back or overhaul large portions of the law. But Democrats worried about GOP attempts to chip away at Wall Street regulations are increasingly objecting to even minor changes in an effort to put down markers ahead of more bruising battles to come.”