In the Market As of June 12, 2014 USDA report has few surprises Wednesday’s Supply and Demand Report from the U.S. Department of Agriculture did little to excite markets. The report included no changes in corn and only minor changes in soybeans and wheat. While the changes were more profound in cotton and rice, the market was expecting them. No changes in corn The corn balance sheet remains unchanged from last month. While some expected the USDA to lower exports, those changes did not occur. Corn prices remain focused on good weather that has some 75 percent of the crop rated good to excellent. The market continues to expect record yields, but has some questions about acreage. With the recent increase in soybeans relative to corn, there may have been some acres lost to soybeans. The USDA will answer this question at the end of June when it releases its final acreage report for 2014. Look for corn prices to continue to move lower as weather remains favorable and likelihood of an El Niño increases. Soybean demand remains robust The USDA again increased soybean demand this month. They increased crush by some 5 million bushels from last month as monthly NOPA crush numbers remain strong. This resulted in another reduction in stocks to just 125 million bushels. While normally we would expect prices to strengthen as a result of this bullish news, the market quickly digested the 2013-14 estimates and turned to the 2014-15 forecast. With more than 87 percent of the soybean crop planted and more than 70 percent rated good to excellent, we are likely going to see record production in 2014. Additionally, as discussed with corn, we could see additional soybean acres. Relatively strong prices may
have pulled additional soybean acres into production, which would further pressure prices. The USDA continues to forecast soybean prices between $9.75 and $11.75 for 2014-15. If the acreage number is adjusted higher, soybeans could fall quickly to $11 or less. Wheat demand remains weak While the USDA reduced wheat production in the United States, reductions in demand more than offset production losses, leading to an increase in stocks. Additionally, global supplies remain more than adequate to meet demand as high wheat prices are reducing wheat competitiveness in the feed market. Wheat prices fell back below $6 this week, and while prices are technically oversold, they continue to struggle for fundamental support to help support prices. Feed prices trending lower Good weather across many of the major growing areas in the United States has the market expecting bumper crops for most major feed ingredients. Lower feed prices continue to improve profitability for livestock producers as feeder margins are near record levels. Rice demand remains weak The USDA again trimmed U.S. rice exports as export sales continue to remain weak. The 3 million cwt decline in 2013-14 exports went straight in stocks and flowed through to this year’s stocks. U.S. exports remain depressed as countries like Vietnam are some $200 per ton cheaper than U.S. rice.
Countries like Haiti, where the U.S. has a distinct shipping advantage, have even started importing Vietnam rice. In fact, Vietnam rice was even imported into Texas last fall. Larger supplies in 2014-15 are forecast to pressure prices lower as the USDA estimates rice prices between $14.40 and $15.40 next year. These lower prices will be necessary for the U.S. to become competitive in the international market. Rains wash cotton prices downriver Beneficial rains in the southern plains led to increases in 2014-15 cotton production as the USDA lowered its abandonment of cotton in that area. While production increased, demand did not, and the USDA now forecasts cotton stocks to be some 4.3 million bales in 2014-15, up from 2.7 million bales this year. These stocks will likely prevent any type of meaningful recovery in the cotton market. Prices could move even lower if demand from China fails to materialize. Record cattle prices Live cattle prices put in new all-time highs this week ahead of the USDA report. The June supply and demand report tightened beef supplies even further, which will provide additional support for this market through the summer. While prices are at record levels, in some cases exceeding $2 per pound, demand remains strong. U.S. consumption shows little change, and exports continue to be strong as a weak dollar supports U.S. exports despite high prices.
CONTACT • Brandy Carroll 501-228-1268, brandy.carroll@arfb.com • Bruce Tencleve 501-228-1856, bruce.tencleve@arfb.com • Matt King 501-228-1297, matt.king@arfb.com