Blogging by the Bushel
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Archive for February, 2013

The historic 2012 drought is far from over, but it has at least subsided in parts of the country.

According to the Palmer Drought Index, a weekly update from the Climate Prediction Center the measures rainfall, temperature and historic data, the majority of the eastern Midwest and Southeast is no longer suffering from drought conditions.

Brad Rippey, USDA meteorologist, reports that 55.82% of the country still in drought. “But we’ve knocked out the eastern Corn Belt.”

While the country at large had some pretty good rains from November through January, we haven’t had much relief until this week in the Midwest, he says.

The good news is current drought conditions should not weigh too heavy on corn yields. “There’s very little relationship between drought this time of year and output for corn,” Rippey says. “We’ve had other years, like 2000 in Iowa, when there was drought this time of year and the eventual outcome was good. The real difference is what happens in late spring and early summer.”

Too Late for Wheat

Unfortunately, extremely dry conditions persist for much of the western Corn Belt and South, from the Dakotas down to Texas. Read more: Drought in Western Corn Belt, Plains Likely to Persist

Wheat-growing areas are among some of the hardest hit, and Joe Glauber, USDA chief economist, reports that the crop may be beyond hope. “Tthe Midwest still has persistent dryness. We could be facing some serious abandonment for hard red wheat spring crop.”

Current crop conditions ratings are grim. “Weighted by seed area, the hard-red winter wheat states of Kansas, Nebraska, and Oklahoma have 50% of their wheat crop rated in poor to very poor condition compared to just 10% at this time last year. Spring rains will be especially important in the Great Plains this year where elevated levels of abandonment are expected.”

David Cleavinger, a Texas wheat producer, reports on Twitter that lack of rain has them watering wheat. “We need a March blizzard. This patch will go for silage instead of grain.”

I was reading a morning wire today that I received from an outside broker and found this to be very interesting. Thank you FC Stone.

I want to discuss the winter thus far. If you will recall, a few weeks back, I had indicated that December was record warm across the grain production areas, and January was a bit cooler than normal. Well…we are half way through February – and we are again running a bit above normal. This is increasing our odds of above normal temps this summer – which increases our odds of a sub-trend corn yield.

When we look at the previous 90 day window – which would stretch back into November a bit, we see that for the most part, all of the Midwest has been warm this winter.

We do have to be careful to not jump to conclusions – we are moving the odds, not creating certainty by any stretch. We have seen improvement in the drought monitor over the past 4 or 5 months – the drought is getting pushed to the west. Continue to monitor…

Corn is getting beat like it stole something… We now work day #9 lower. March chart below: market is now challenging the January report day low. Failure here plugs the weekly chart gap at 676 ¼ and sets a test of the overall market re-trace of 662 ¾.

There are 19 trading days in February, and we have seen 8 of them thus far. A year ago, our crop insurance sets were 5.68 for corn and 12.55 for soys. At this point, our average CZ is at 5.7575; and SX is showing 13.1391.

As we enter the second month of 2013, let’s look ahead. We could spend all day recapping the unbelievable market events of 2012. But, frankly, as someone who reads and talks market information on a daily and sometimes hourly basis, year-round, looking forward sounds more interesting.

The farm markets have a number of questions to find answers for, right in the first few months of the new year. First, the size of the current South American soybean crop is one market factor that will start to get answered later this month. With the Brazilian farmers already over half sold on new crop, the export market will have to figure out if Brazil’s logistics (truck transportation, shipping port congestion, harvest weather, etc.) will be able to handle a wall of soybeans. Keep in mind, Brazil is expected to produce a record amount of soybeans in 2013. Another market question, yet smaller, is just how much corn will Brazil and Argentina produce and export?

On a back burner, but still on the stove, is this longstanding concern about whether the Black Sea countries can find enough wheat for their own needs and their customers’ needs. Whether it be for feed or food, the European countries are flirting with export bans, due to recent droughts.

Everybody — and I mean everybody — wants to know what China’s economy is going to do in 2013 and beyond. One day you hear it is not going to have a hard landing, and then the next day you hear consumption is down, and yet another day you hear the Chinese government wants to adjust its currency to help exports. I don’t know what’s next, but the market is eyeing the Asian demand for U.S. soybeans and corn.

And what’s the big elephant in the room, regarding a long-term market outlook? Let me spell it for you: W-E-A-T-H-E-R. Will the U.S. Midwest get ample soil moisture, by spring, to get farmers’ fields ready to plant the 2013 crop? And even before that: The market wants to know if enough snowmelt will flow into the Missouri River to help the extreme low flows on the Mississippi River?

I’m sure it’s not much different than other years, but it seems there is no shortage of market-related questions as we move forward in 2013.


U.S. feed grain ending stocks for 2012/13 are projected higher this month as lower expected exports outweigh an increase in projected domestic usage. Corn exports are projected 50 million bushels lower based on the sluggish pace of sales and shipments to date and prospects for more competition from Brazil. Corn use for ethanol production is unchanged, but corn use for sweeteners and starch is raised 20 million bushels, boosting projected food, seed, and industrial use. Projected corn ending stocks are raised 30 million bushels. The projected range for the season-average farm price for corn is lowered 20 cents at the midpoint and narrowed to $6.75 to $7.65 per bushel. Reported monthly prices received by farmers to date continue to reflect forward sales made at prices below prevailing cash market bids.

Usage changes for 2012/13 are also made this month for sorghum and barley. Sorghum feed and residual use is projected 25 million bushels lower, but offset by a 20-million-bushel increase in food, seed, and industrial use and a 5-million-bushel increase in exports. Projected barley exports are lowered 1 million bushels, based on indications of slower-than-expected shipments. Barley ending stocks are increased by the same amount. The projected range for the sorghum farm price is lowered 15 cents at the midpoint and narrowed to $6.70 to $7.60 per bushel. The barley farm price range is narrowed 5 cents on each end to $6.15 to $6.65 per bushel.

Global coarse grain supplies for 2012/13 are projected 2.1 million tons higher as a decrease in beginning stocks is more than offset by a 2.9-million-ton increase in production. Lower 2012/13 beginning stocks mostly reflect an increase in 2011/12 corn exports for Brazil and revisions to the Paraguay corn series that lower 2011/12 corn area and yield.

Global 2012/13 corn production is raised 2.1 million tons with increases for Brazil, Mexico, India, and Ukraine more than offsetting a reduction for Argentina. Brazil production is raised 1.5 million tons based on higher reported area and yields for the first-season crop and good early prospects for second-season corn. Mexico production is increased 0.8 million tons with higher reported area for the summer crop. Production is raised 0.6 million tons for India on higher area as indicated by the latest sowing progress reports. Ukraine production is increased 0.4 million tons on higher reported yields. Argentina production is lowered 1.0 million tons as persistent dryness in January and early February lowers yield prospects, particularly for late-planted corn.

Global 2012/13 production is also higher this month for sorghum, barley, oats, and rye. Sorghum production is raised 0.4 million tons for Mexico with higher area and yields for the summer crop, but lowered 0.2 million tons for Australia with reduced prospects for area and yields. Global barley, oats, and rye production are up a combined 0.6 million tons on larger reported crops for the FSU-12 countries.

Global coarse grain trade for 2012/13 is higher mostly reflecting increased imports of barley for Saudi Arabia, Turkey, and Tunisia and higher sorghum imports for Mexico and Japan. World corn imports and exports are raised only slightly, but significant shifts are made among countries. Corn imports are raised for EU-27 and China, but lowered for Egypt, Syria, Mexico, and Saudi Arabia. Corn exports are raised for Brazil and Ukraine, but lowered for the United States and Argentina. Global corn consumption for 2012/13 is lowered with a reduction in world feed and residual usage. Corn feed and residual use is lowered 2.0 million tons for Brazil, 1.0 million tons for Egypt, and 0.4 million tons for Argentina, but raised 2.0 million tons for EU-27 and 0.5 million tons for China. Global corn ending stocks for 2012/13 are projected 2.1 million tons higher with the largest increases expected for Brazil and the United States.


U.S. soybean ending stocks for 2012/13 are projected at 125 million bushels, down 10 million from last month due to increased crush. Soybean crush is raised 10 million bushels to 1.615 billion reflecting both larger soybean meal exports and domestic use. Strong U.S. soybean meal exports during the first half of the marketing year are partly offsetting declining shipments from Argentina where crushing has slowed due to limited soybean supplies. Domestic soybean meal use is raised in line with projected gains in meat production. Soybean oil production is raised on higher soybean crush and a higher soybean oil extraction rate. Soybean oil exports are projected at 2.3 billion pounds, up 150 million from last month as sales continue stronger than expected. Soybean oil used for methyl ester is unchanged this month despite relatively low use during the first quarter of the marketing year. Production and use are expected to expand in coming months due to the higher mandate for 2013. Soybean oil stocks are projected at 1.665 billion pounds, up 125 million.

The U.S. season-average soybean price range for 2012/13 is projected at $13.55 to $15.05 per bushel, up 5 cents on both ends of the range. The soybean meal price is projected at $430 to $460 per short ton, unchanged from last month. The soybean oil price projection is also unchanged at 49 to 53 cents per pound.

Global oilseed production for 2012/13 is projected at 466.9 million tons, up 1.1 million from last month. Global soybean production is raised fractionally to 269.5 million tons as improved production prospects in Brazil offset deteriorating conditions in Argentina. Soybean production for Brazil is projected at a record 83.5 million tons, up 1 million from last month due to higher yields resulting from improved moisture in the center-west. Prospects for the Argentina soybean crop have diminished in recent weeks due to an extended period of dry weather. As a result, the crop is projected at 53 million tons, down 1 million from last month. Global sunflowerseed production is projected at 36.4 million tons, up 0.5 million due to gains for Russia and Kazakhstan. Other changes include increased peanut and cottonseed production for China, and reduced cottonseed production for Pakistan, Mexico, and Turkey.

Global oilseed and product supply and use changes this month include reduced soybean crush and soybean meal exports for Argentina, reduced soybean meal imports for EU-27, increased rapeseed crush and rapeseed meal consumption for EU-27, and increased sunflowerseed crush in Russia. Global oilseed stocks are projected higher, mostly reflecting higher soybean stocks in Brazil.


U.S. wheat ending stocks for 2012/13 are projected 25 million bushels lower this month with higher expected feed and residual disappearance. Feed and residual use is projected 25 million bushels higher as weaker cash prices relative to corn support opportunities for increased wheat use in livestock and poultry rations. Feed and residual use is raised 10 million bushels each for Hard Red Winter (HRW) and Soft Red Winter (SRW) wheat, and raised 5 million bushels for White wheat. Projected all-wheat exports are unchanged, but HRW and Hard Red Spring wheat are lowered 25 million bushels and 5 million bushels, respectively. Offsetting these reductions are projected increases in SRW and White wheat exports of 25 million bushels and 5 million bushels, respectively. By-class export changes largely reflect the pace of sales and shipments to date. The projected season-average farm price for wheat is narrowed 5 cents on both ends of the range to $7.70 to $8.10 per bushel.

Global wheat supplies for 2012/13 are nearly unchanged with a small increase in beginning stocks more than offsetting a small decrease in production. Global wheat output is projected 0.7 million tons lower. Production is lowered for Kazakhstan and Brazil, but raised for Ukraine, South Africa, and Belarus.

Global wheat trade for 2012/13 is trimmed slightly. Imports are lowered 0.5 million tons for Morocco, 0.3 million tons for Saudi Arabia, and 0.2 million tons each for Israel, South Africa, and Vietnam. Imports are raised 0.6 million tons for South Korea, 0.5 million tons for Iran, and 0.2 million tons for Brazil. Exports are raised 0.5 million tons for EU-27, but reduced 0.5 million tons for Kazakhstan and 0.3 million tons for Brazil. Lower exports for Brazil and Kazakhstan reflect smaller crops, while the increase in South Korea imports supports higher wheat feeding. Wheat feed and residual use is also raised for Ukraine. Wheat feed and residual use is lowered for EU-27, Saudi Arabia, Kazakhstan, Vietnam, and Israel. Global wheat consumption is virtually unchanged at 673.4 million tons; however, global consumption is projected down 24.6 million tons year to year, mostly reflecting lower feed and residual use in 2012/13. World wheat ending stocks for 2012/13 are also nearly unchanged this month at 176.7 million tons. Lower projected ending stocks in the United States and Morocco are offset by higher stocks in Iran, South Korea, and Ukraine.


Ending stocks are estimated at 652 mb on the February report, up 50 mb from the USDA January estimate.

  • Ethanol production has taken a turn lower over the last month. The implied annual corn use peaked near the beginning of 2013, declining 35 mb since then. The average daily ethanol produc-tion rate so far this year implies marketing year corn use of 4,505 although the current 4-week average only implies corn use of 4,343 mb.
  • The daily production rate needs to average 802 thousand barrels/day over the remaining 7 months of the corn marketing year to use 4,500 mb of corn.
  • Corn use for ethanol is estimated at 4,475 mb this month, down from 4,500 mb January USDA esti-mate.
  • The RFS mandate starts to become constraining much below a 4,500 mb corn use pace. The RFS mandates are for the calendar year rather than corn marketing year, but are the equivalent of about 4,940 mb of corn use for 12/13 and 5,160 for 13/14. Previously generated excess RINS can be used to meet 2013 obligations, but will basi-cally be exhausted at the end of 2013.
  • Exports remain dismal, and another reduction is warranted this month. Over the last month, the implied pace dropped another 50 mb. The only saving grace is the potential for a reduction in world production. We estimate exports at 925 mb, down 25 mb this month.
  • Argentina’s corn production was unexpectedly raised by the USDA to 28 mmt in January. A de-crease of 2-3 mmt is expected due to the dry weather over the last month.



  • 2012/13 stocks are likely to remain near the 135 mb esti-mate published in January because that is essentially the pipeline minimum. Any expansion in usage would have to be met with a higher import total (more likely this month) or a reduction in residual use (more likely when adjustments to stocks data are required).
  • Monthly soybean exports will have to slow to five year lows from February forward to hit the 1,345 mb export estimate.
  • Monthly estimates shown below translate to a weekly pace of 32.5 for February, and 17 mb in March. The most recent weekly total was 54 mb.
  • The December crush was 10% ahead of last year, and cumula-tively also 10% ahead of last year. The January USDA estimate of 1,605 is still a 6% y/y reduction. We estimate crush at 1,610 mb.
  • Meal and oil exports have leveled off, but commitments for both have maintained commitments at a higher than normal percent-age of the USDA estimates. At 83% and 75%, respectively, the current meal and oil commitment paces suggest higher export totals, and upward pressure on the crush total.
  • South American production is always a focus of the February report. In January, the USDA reduced its estimate for Argentina by 1 mmt to 54 mmt, and increased its estimate for Brazil by 1.5 mmt to 82.5 mmt. Our expectations are for 53.5 for Argentina and 82.5 for Brazil.



  • On the U.S. balance sheet, the export category will be the key to any change in ending stocks this month. We expect ending stocks to rise 10 mb to 726 mb. From the domestic perspective, U.S. export all wheat commitments are 72% of the January USDA estimate of 1,050 mb. The 5-year average at this point is 80%, implying that either this year will be more weighted to the last four months, or the export total will be lower than 1,050. With U.S. wheat competitive in export mar-kets now, the U.S. sales pace should be more back-loaded than average, but not quite enough to hit the 1,050 mb target. We expect a final total of 1,040 mb.
  • By class, HRW and HRS exports are expected to be lowered 15 mb each, while SRW and white each see a 10 mb increase.
  • Argentina’s crop is expected to be lowered to 10.3 mmt from 11.0 mmt. World import needs are a factor argu-ing against additional further cuts to the U.S. export total.
  • Board prices have steadily moved in favor of wheat feeding over the last month. No adjustment is expected this month, but it is worth noting that the March ratios of wheat to corn in both KC and Chicago are at contract lows. Reports from our contacts confirm that wheat feeding is increasing.

Like many Americans the only reason I personally watch the Super Bowl is for the commercials. Mainly because every time a team I do like plays, like the Chicago Bears, they always lose. Or in the case of the Detroit Lions their chances of ever playing in the super bowl are slim to nill. So that leads me back to my original point, the commercials. Last night I must say I was somewhat disappointed. The pricy and often short ads were nothing compared to years past. However, several ads highlighted aspects of farm life including mischievous (or cute) animals like goats and horses which I loved. My personal favorite of the night though was a spot titled “So God made a farmer” featuring a Paul Harvey voiceover. What I did not know until today is that the ad, was a collaboration between Ram Trucks and sister company Cash IH and kicks off a campaign identifying 2013 as “The Year of the Farmer”. Ram trucks will donate money to the National FFA Organization with each viewing of the Super Bowl ad to support the organizations hunger relief efforts. In case you missed it, below is the ad. Let’s help support the FFA.

\”So God made a farmer\”

I don’t know about you, but if I get out of the habit of doing something I’ve done routinely, I find it extremely difficult to get back into the swing of things.  Almost like I need to rip off that band aid but I’m too lazy to do it.  So to anyone who is still reading this blog, thank you for being here! 

Since my last post on November 28th, many many many things have changed…and mostly for the good!  The biggest of which is my husband Matthew and I welcomed our first child, Audrey Ann Kaverman on December 6th, 2012. She was a little early but everything went well. Now we may be a little partial but she is the prettiest little girl there is.  

After a whirlwind December and eight weeks of maternity leave, it is now the first full week of February and I find myself back in the saddle. Being a mother is the best thing in the world, but it feels good to be back to work. The downside is that a lot can change in eight weeks in terms of the markets.  As the cliché goes, tune in next time as I catch you up on the latest and greatest market information.