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Corn: bumper crops for competitors

The USDA Commodity Credit Corporation lending rate for March is 1.375 percent. Dollar values are up 1.5 percent this week. That makes U.S. commodities more expensive for importing nations to buy.


Bearish news: Bumper corn crops in Argentina and South Africa are bearish. Argentina is the second largest corn exporting nation after the United States. South Africa is the largest corn exporting nation on the African continent. They compete with the United States for corn export sales. South American weather is harvest favorable. Argentine corn production estimates increased 3 million tons near 55 million total production.

Weekly corn export sales were below expectations at 451,000 tons. U.S. corn acres are expected to increase 2 percent and production is expected to increase 1 percent. Cattle on feed are at a 50 year low. World corn production is expected to increase 6 million tons to 797 million.

Corn feed use is down. Cattle herds are at record low levels. Hog herds are smaller, even chicken flocks are lower than average. Wheat prices are low enough in many countries that wheat substitutes for corn as feed. This is especially true with some low quality Asian wheat.

Bullish news: Wet soil conditions in the United States are expected to delay spring planting. Increased ethanol use and strong energy prices are keeping ethanol prices up spilling into the corn markets. Farmer selling remains low.

Ethanol production has reached a new record of 24 billion gallons. Globally, current corn supplies are decreasing. Ethanol production used 375 million bushels in January.


Bearish news: Soy meal demand has dropped and so have prices. Meal is primarily used for animal feed. People eat less meat during recessions and smaller herds mean less feed use. Domestic meal supplies are expected to reach 630,000 tons. Soy meal supplies are projected to increase beyond use pressuring soybean prices.

Soybean export sales last week were bearishly below expectations at 232,000 tons. Surging supplies out of South America are one factor. The expected slowdown in Chinese demand appears to have started to wane. 250,000 tons of exports to China were cancelled. Chinese imports for February down 18 percent. South American bean prices are near an 11 month low.

Soybean crush is down significantly at 167 million bushels and well below market anticipation. The decreased demand for soy oil increased USDA supply estimates significantly. Lower soy oil use is bearish for soybeans. Soy oil supplies are expected to reach 3.24 billion pounds.

Bullish news: Soybean exports have increased 34 percent this year. Soy-oil exports of 40,000 tons were higher than anticipated. Soybean deliveries of 430 contracts were higher than markets anticipated.

Palm oil prices continue to rise 1.3 percent this week. Soy oil prices are higher in China. World vegetable oil supply is anticipated to drop 1.8 million tons this year.


Bearish news: Traders have so many short positions in the wheat market they reluctant to continue selling. Some European countries are limiting exports of wheat after the plunge in value of the euro. This move probably reflects the government’s attempt to keep enough wheat on hand for domestic use.

Russian wheat is low priced and available. Total world supply estimates continue to rise. World wheat production is near record levels. U. S. production estimates of 659 million tons are 6 million higher than the last estimate. India has a bumper winter wheat crop to harvest. Japan is entering into a long term agreement with the Russian wheat market.

Bullish news: Wheat export sales last week were surprisingly strong at 409,000 tons. Winter wheat acres have dropped to the lowest level since 1913. Iraq and Thailand are buying wheat.


Bearish news: U.S. rice supply estimates are bearishly increased a million hundred weight. World rice supply estimates increased 8 million tons. Rice exports of 74,000 tons were lower than the past few weeks but could have been lower. Turkey bought 33,000 tons of the total sales on a single purchase. Eurasia and Africa are buying lower priced Vietnamese rice.

Vietnam is selling rice below world prices to generate cash income. Thailand is releasing rice for export out of strategic reserves. Thailand rice is selling at world market prices. Thailand rice is higher priced than Vietnamese rice but lower priced than United States rice.

Bullish news: Rice from the United States remains competitive in the Western Hemisphere because of higher freight prices. U. S. grain markets have been opened up to Cuba. This will increase exports. Shipments were 112,000 tons, most of it to Central and South America. More rice will be needed in Haiti. The United States will likely be the country of origin due to higher freight cost.


Bullish news: Cotton prices have not been on parity with soybean prices for over a year. Cotton price parity with soybeans is usually about 10 percent. In other words, $9 soybeans are matched by 90-cent cotton. $4 corn likewise competes with $1 cotton. It looks like the ratio will be reestablished by rising cotton prices or lower corn and soybean prices.

Bearish economic news is having less effect on cotton prices than tight supply projections. If U. S. cotton supplies actually decrease to 3.3 million bales that is about half the annual domestic and export use. Deliveries of cotton continue to rise above market expectations.

Cotton acres are anticipated to increase between 1 million and 1.5 million acres. That half million acre spread in estimates reflects uncertainty of grower commitment.

Bearish news: Unemployment remains high, but employment is a lagging economic indicator. High unemployment affects the number of housing starts which are also down. The leading uses of cotton are clothing and household goods.

Cotton exports were down 69 percent to 122,000 bales. This reflects the low level of business transacted during the week long Chinese New Year holiday. Higher priced cotton is also limiting export potential.

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