Download Grains lower, livestock futures higher for the week

February 27, 2016 • Vol. 44, No. 9
Grains lower, livestock futures higher for the week — Bears dominated price action in grain and
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News this week...
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Global crop and demand news.
Grim FY 2016 U.S. trade outlook.
USDA’s first stab at 2016-17.
Tyson unveils antibioticfree pork brand.
Tyson Foods unveiled
its
Open
Prairie
Natural Pork brand
last week. The new
brand delivers minimally processed food
and contains no artificial ingredients. It
also features pigs
raised without antibiotics, hormones and
gestation
stalls.
Tyson is touting this
as a consumer choice,
not a health benefit.
The company says it
developed its natural
pork brand to meet
the growing demand
for natural pork,
while allowing retailers to diversify their
product mix.
See you at
Commodity Classic.
Stop by booth #911 at
Commodity Classic
March 3-5 in New
Orleans to visit with
some of your Pro
Farmer editorial staff.
soy futures last week. Aside from ongoing macroeconomic worries, South American weather remains generally favorable and
markets are burdened with too much supply and not enough demand. USDA didn’t do bulls any favors with its initial projections for the 2016-17 marketing year (see News page 4 for details). Corn and soybean futures dropped below their mid-February lows and appear headed toward a test of contract-low support. Winter wheat futures slumped to new lows, while spring
wheat futures held just above their mid-February contract lows. The bright spot was cattle futures, which posted gains every
day last week amid surging boxed beef prices and bullish cash cattle hopes. Lean hogs also finished higher for the week as traders want to maintain spring- and summer-month futures’ premium to the cash market as supplies will tighten seasonally.
Acreage the big focus at Outlook Forum
USDA projects 2016 acreage for the eight
major crops (corn, soybeans, wheat, cotton,
rice, sorghum, barley and oats) will fall by 1%
to 249.1 million acres due to the downturn in
prices. That had some scratching their heads
at USDA’s annual Outlook Forum last week.
U S D A
U.S. Major Crop Acreage
C h i e f
8-crop index of lagged
Economist
real area-weighted
prices (left axis);
R o b e r t
2004 = 100
Johansson
acknowledged high
2015
pre8-crop plantings:
ve n t - p l a n t
Source: USDA
mil. ac. (right axis)
acres relative
to what the
a g e n c y
expects this year in discussing its 2016 soybean
acreage projection of 82.5 million acres, down
150,000 acres from last year. Many feel this is
too low. USDA projects corn plantings will rise
2 million acres to 90.0 million acres this year.
USDA contacts we visited with defended
the numbers, stressing they assume a return
to “normal” prevent plant levels.
The 3.6-million-acre decline in total wheat
acres to 51.0 million implies spring wheat
area will fall around 700,000 acres. USDA
contacts signaled the spring wheat acres will
go to other crops or potentially be idled.
USDA’s price forecasts for the 2016-17
marketing year also drew attention, particularly the downturn for wheat. USDA projects a 2016-17 average cash price of $3.45 for
corn, $8.50 for soybeans and $4.20 for wheat.
Keep in mind, these are USDA’s initial
projections. Conditions will change.
For more details on USDA’s initial 201617 Supply & Demand tables and the one-,
three- and six-month Doane Ag Research
price projections, see News page 4.
Crop-friendly Brazilian weather
Dry conditions in central Brazil are allowing
soybean harvest to advance rapidly. Slightly
more than one-third of the Brazilian bean
crop has been cut and yields are increasing as
harvest progresses, says Pro Farmer South
American Consultant Dr. Michael Cordonnier.
The rapid harvest progress is also facilitating
quick planting of safrinha corn. Cordonnier
says safrinha corn planting will continue into
mid-March and acreage is likely to be up 5%
to 10% from last year if weather cooperates.
Meanwhile, rains across southern Brazil continue to benefit later-maturing soybeans.
More flooding in central Argentina
Heavy overnight rainfall Feb. 25-26 resulted
in more flooding in eastern Cordoba and
western Entre Rios. Aside from low-lying
areas, benefits of rains should outweigh
negative impacts for corn and soybean crops.
Early corn yields in Argentina are stronger
than expected, according to Cordonnier.
Brazil corn exports expected to decline
Brazil is likely to export 28 million metric
tons (MMT) of 2016-crop corn, down 2.75
MMT from last year’s record level, according
to the country’s cereal exporting association.
Lower Brazilian corn exports wouldn’t necessarily mean more demand for U.S. corn, as
Argentina is likely to pick up the slack.
Daniels calls for fight against anti-GMO
Former Indiana governor and current
Purdue University President Mitch Daniels
at last week’s USDA Outlook Forum called
on the public, private and nonprofit sectors
to push back against attackers of biotechnology. Daniels called the attack on GMOs “the
most blatant anti-science of the age.” He
said, “Lives are at stake. Thousands of studies and trillions of meals consumed prove
the safety of biotechnologies.”
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Marketing loan
use surges.
USDA data shows
producers have
taken out marketing assistance
loans (MAL) on an
increasing amount
of 2015-crop corn,
soybeans, wheat
and sorghum.
Loan totals for the
week ended Feb.
15 were the highest for corn since
the 2010 crop
year, and the highest level for soybeans, wheat and
sorghum since the
2009 crop year.
Rural bankers’
attitudes modestly improve.
The February
Rural Mainstreet
Index conducted
by Creighton
University’s Dr.
Ernie Goss
showed the farmland index rising
nearly six percentage points, or
25%, to 29.8. But
this still leaves
the index well
below 50, which
is considered
growth-neutral.
This is the 27th
straight month
the index has
been below
growth-neutral.
The February
farm equipmentsales index
climbed to 11.3
from January’s
record low 7.0.
Rural banker attitudes toward their
local economies
increased to 37.0
from January’s
34.8 reading, but
36.9% of bank
CEOs report their
local economy
was in recession.
Consultant raises South
American crop estimates
Weather is generally favorable
across Brazil’s key production
areas, aside from dryness in
northeastern areas. As a result,
Pro Farmer South American
Consultant
Dr.
Michael
Cordonnier raised his Brazilian
soybean and corn crop estimates
this week. He upped his Brazilian
soybean crop forecast by 1 million metric tons (MMT) to 99
MMT as yields have been increasing outside of Mato Grosso as
harvest progresses. His Brazilian
corn crop was increased 800,000
metric tons (MT) to 84 MMT
amid the favorable weather and
rising safrinha (second crop) corn
acreage expectations.
Weather is also mostly favorable in Argentina. While there
has been recent flooding in
some low-lying areas, the rains
should benefit the corn crop
overall. As a result, Cordonnier
raised his Argentine corn crop
estimate by 1.4 MMT to 25.0
MMT. He kept his Argentine
soybean crop peg at 59 MMT,
but he has a higher bias and says
he’ll likely raise his estimate if
weather remains favorable.
Fewer port strikes expected
in Argentina this year
Leaders of Argentina’s grain
workers’ unions say they expect
upcoming wage talks with the
newly elected government to go
better than in years past. That
should help the country avoid
labor strikes. Port labor strikes
have been common in recent
years around the main Rosario
grain and soy hub, causing a
variety of shipping delays.
Leaders of the country’s Port
Workers Cooperative, the soy
crushers union and the national
grain warehouse workers’ union
have indicated they will “play
nice” when it comes to a wage
deal. The agriculture and ag
trade sectors have been major
beneficiaries of policy changes
after the election of Mauricio
Macri in December.
February 27, 2016 / News page 2
Ukraine grain crop lowered
A rough start to the growing
season last fall along with
extreme temperature swings
through winter have trimmed
Ukraine’s grain crop potential,
according to UkrAgroConsult.
The consulting firm says more
than one-third of the country’s
winter grains crops are at risk,
much of that being winter wheat.
As a result, UkrAgroConsult
lowered its 2016 Ukraine grain
production forecast to 52.2
MMT, down 10% from last year.
It trimmed its wheat crop estimate to 17.25 MMT from 17.8
MMT, previously.
Record Russian grain
exports likely this month
Russian grain exports slipped
22.4% below year-ago in January
at 1.769 MMT, with wheat
exports down 35.5% from 201415 levels. But Russian grain
exports are expected to be recordlarge for February at 2.2 MMT,
including an estimated 1.5 MMT
of wheat, according to SovEcon
consultancy. If those forecasts are
realized, that would represent a
75.2% increase for grain exports
and a 235.6% surge in wheat
shipments over February 2015.
Russian grain exports are expected to remain strong through
March, but there’s uncertainty
after that, according to SovEcon.
Meanwhile, Russia plans to
boost grain output by nearly
25% to 130.3 MMT by the year
2030. It hopes to increase total
grain exports by 61% to 48.3
MMT during that timeframe.
EU struggling to sell wheat
Strong competition from Russia,
Ukraine and Argentina, along
with Egypt’s wheat buying
uncertainty and sluggish Middle
East demand, are limiting EU
wheat exports. As a result, the
EU is facing its biggest wheat
ending stocks in seven years,
while France is likely to have its
largest stockpile in 17 years.
This is not good news for U.S.
wheat, as EU wheat is cheaper.
South Africa lowers corn crop
South Africa’s corn crop is now
forecast at 7.255 MMT by the
country’s supply agency. That’s
down 185,000 MT from its previous estimate but 385,000 MT
higher than a Reuters poll of traders indicated Late-season rains
have brought relief to some areas,
but that did little more than stabilize crops where rains fell.
Chinese DDG imports slow
China imported 290,653 MT of
dried distillers grains (DDGs) in
January. That was down 30%
from December. Concerns over
the country’s anti-dumping
investigation against U.S. DDGs
are expected to limit imports,
though a trader told Reuters
companies should be “safe” to
import U.S. DDGs until May.
Chinese sorghum imports
totaled 923,941 MT for January,
all from the United States. That
was up 26% from year-ago, but
China has been slow to issue
import permits for sorghum, so
the import pace will decline.
Outstanding sales of U.S. sorghum to China for 2015-16 are
running 69.3% behind year-ago.
China toughens canola regs
China will reduce the amount of
foreign material it allows in canola imports from Canada beginning April 1. It will allow no more
than 1% foreign material, down
from its current allowance of
2.5%. The new standard will likely cause some exporters to slow
canola shipments to China.
China is trying to sell 6 MMT
of rapeseed oil reserves. Weekly
Chinese rapeseed oil sales
surged 64% last week on news
of the new import standards.
IGC raises global grain crop
Global 2015-16 grain production
was raised 10 MMT to 2.002 billion MT by the International
Grains Council (IGC). The
increase came amid a bigger
global corn crop forecast. IGC
upped its 2015-16 global grains
ending stocks estimate to 465
MMT, the highest in 29 years.
Grim U.S. ag trade prospects GMO food labeling bill
USDA’s quarterly ag trade out- finally introduced
look calls for the U.S. to export
$125.0 billion of ag goods in fiscal year (FY) 2016, a $6.5-billion
drop from its November projection and a $14.7-billion decline
from FY 2015. USDA says “lower
prices, strong competition and
reduced demand” are to blame
for the decline.
USDA calls for grain and feed
exports of $27.2 billion, down
$4.4 billion from FY 2015. Corn
exports are forecast at $7.4 billion, down $1.4 billion from
year-ago due to increased competition from Argentina and
Brazil. Wheat exports are expected at $5.0 billion, down $846 million from FY 2015 due to dollar
strength, heightened competition from Argentina and Canada,
and record global supplies.
Oilseed/product exports are
projected at $25.4 billion in FY
2016, down $6.3 billion from FY
2015. U.S. soybean exports are
forecast at $17.0 billion, down
more than $4.6 billion from last
year. USDA says a strong dollar
relative to South American currencies has compromised U.S.
competitiveness.
U.S. ag imports are expected to
hit a record $118.5 billion in FY
2016, an increase of $4.5-billion
from the year prior, but a $3.5-billion decline from USDA’s
November peg. This translates to
a U.S. FY 2016 ag trade surplus of
$6.5 billion, down nearly 75%
from FY 2015 and the lowest ag
trade surplus since FY 2006.
Food prices inch higher
The Consumer Price Index (CPI)
for all food climbed 0.3 percentage
points in January to 0.8% above
year-ago levels, according to
USDA’s Economic Research
Service (ERS). The food-awayfrom home (restaurant) CPI rose
0.3 points last month to 2.7%
above year-ago. The food-at home
(grocery store) CPI also climbed
0.3 points in January to 0.5% below
year-ago levels. ERS maintained
its forecast for food prices to rise
the normal 2% to 3% this year.
A bill that would set up a voluntary labeling system for food
and animal feed containing
genetically modified ingredients
was introduced late Feb. 19 by
Sen. Pat Roberts (R-Kan.).
Robert’s bill would federally
preempt a potential patchwork
of differing state laws regarding
GMO labeling of food. A law
requiring mandatory labeling of
foods containing GMO products
in Vermont takes effect July 1.
A chairman’s markup of the bill
was originally scheduled for Feb.
25, but that was pushed back to
this week as talks continue.
Whether the measure gains bipartisan support will depend largely
on Sen. Debbie Stabenow
(D-Mich.), ranking ag panel member. She has so far pushed for a
mandatory label and a two-year
moratorium on state laws rather
than permanent preemption.
Sugar supply squeeze
Sugar prices saw their biggest
one-day surge since 1993 on Feb.
23 amid increasing concerns
about tightening supplies globally and in the United States.
The rally was largely fueled by
the
International
Sugar
Organization’s decision to raise
its 2015-16 global sugar deficit
forecast by 1.5 MMT from
November to 5.0 MMT. It cited
lower production forecasts for
India, Thailand, Brazil and the
European Union due to El Niño.
Meanwhile, USDA Under
Secretary Michael Scuse said the
U.S. is considering increasing its
imports of raw sugar due to
tight supplies. Some refiners say
the sugar trade deal with Mexico
has curbed access to raw supplies as Mexican millers are
shipping more refined sugar
directly to food manufacturers.
Scuse also said heightened
demand by food makers for nonGMO sugar has complicated the
situation. Currently, more than
half of U.S. sugar production
comes from beets produced
mainly from GMO seed.
Feedlot supplies nearly in
line with year-ago
USDA’s Cattle on Feed Report
showed the On Feed category
just a tick higher than the average pre-report estimate at 100%
of year-ago, but the “miss” was
only 10,000 head. Placements
were slightly larger than expected at 0.6% under year-ago, while
Marketings were slightly less
than anticipated at 2.2% less
than January 2015.
Feb. 19 Cattle on Feed Report
USDATrade
actualexpected
(percent of year-ago)
On Feed Feb. 1
100%
99.9%
Placed in Jan.
99%
99.0%
Mkted in Jan.
98%
98.4%
The trend in cattle placed into
feedlots shifted last month, as only
the lightweight category came in
under January 2015. Because lightweight placements were down
17.1%, the overall number of animals placed on feed came in 10,000
head lower than year-ago. But
6-weight, 7-weight and heavyweight placements were up 7.4%,
4.2% and 2.7% from 2015 levels,
respectively. After seven straight
months of lower-than-year-ago
placements, we anticipate the
number of calves entering feedlots
will climb in the months ahead.
Record January meat stocks
Total red meat and poultry supplies in storage as of Jan. 31 were
record-large for the month at
2.270 billion pounds. That was
8.2% larger than the January 2015
total meat inventory.
End-of-January beef stocks at
518.5 million lbs. were recordhigh for the month, coming in
1.2% higher than December and
5.4% greater than January 2015.
Pork stocks of 637.0 million
lbs. were also record-high for the
month. Pork stocks rose 16.7%
from December and were 6.9%
higher than year-ago.
Chicken stocks, which rose
12.9% from the previous year to
824.8 million lbs., remain a concern. That’s a lot of chicken
breasts that will be competing
against beef and pork as retailers
start spring meat features.
Indiana lifts bird
flu quarantine.
The quarantine
area due to the
highly pathogenic
avian influenza
(HPAI) incident in
Dubois County,
Indiana, was lifted
Feb. 22. All farms
within a 6.2-mile
radius consistently tested negative
throughout a
38-day period,
allowing the quarantine to be lifted.
The quarantine
due to a lowpathogenic strain
of bird flu that
was identified on
another nine nearby commercial
turkey farms will
remain intact until
cleaning and disinfection requirements are finished.
CME Group to
add grain quality
data to wheat,
oats deliveries.
CME Group said
last week it will
publish the level
of vomitoxin on
wheat delivered
against its wheat
contracts, starting
with the March
2016 contract.
Grain merchandisers expect the
data will confirm
quality problems
with SRW wheat
put up for delivery. The exchange
will also specify
whether oats
deliveries were
graded as “slightly weathered.”
Northeast Kansas.
“Lots of NH3
going on in Brown
County. There’s
even going to be
a little corn-oncorn in southern
Brown County.”
Central Indiana.
“With all of the rain
this winter and
warmer-than-normal temps, I’m glad
I started using
cover crops on
most of my acres
three years ago.”
February 27, 2016 / News page 3
USDA’s first 2016-17 balance sheets signal lower prices ahead
by Editor Brian Grete and Washington Consultant Roger Bernard
U
SDA releases its new-crop
Supply & Demand tables at its
Outlook Forum each year. The balance sheets give traders an initial
look at what USDA economists are
anticipating for the upcoming marketing year. These are USDA’s “best
guesses” at this time. Conditions will
change over the course of the coming
15 to 18 months before the 2016-17
marketing years are complete.
Corn: 90.0 million planted acres,
82.3 million harvested, yield of 168
bu. per acre for a 13.825 billion bu.
crop. Domestic use of 12.025 billion
bu., with feed and residual use up 125
million bu., steady ethanol use and a
slight uptick in exports to 1.7 billion
bu. for carryover of 1.977 billion bu.
— the highest since 2004-05. Average
farm price: $3.45 per bushel.
Soybeans: 82.5 million planted
acres, 81.6 million acres harvested,
46.7 bu.-per-acre yield for a crop of
3.810 billion bushels. Crush of 1.9 billion bu. and exports of 1.825 billion
bu. (second largest on record) for carryover of 440 million bushels. Average
farm price: $8.50 per bushel.
Wheat: 51.0 million acres planted,
43.4 million acres harvested, 45.9 bu.per-acre yield for crop of 1.991 billion
bushels. Total use to rise to 2.093 billion bu. (higher exports and domestic
use) for carryover of 989 million bu.
— the highest since 1987-88. Average
farm price: $4.20 per bushel.
Year
Ago
CORN
Central IL, bushel
Omaha, NE, bushel
Dried distillers grain, IA, $/ton
SOYBEANS
Central IL, bushel
Memphis, TN, bushel
Soymeal, 48% Decatur, IL, ton
WHEAT
Kansas City, HRW, bushel
Minneapolis, 14% DNS, bushel
St. Louis, MO, SRW, bushel
Portland, OR, soft white, bushel
Northeast MT durum, 13%, bushel
SORGHUM, Kansas City, cwt.
COTTON, 11/16 SLM, 7 area, ¢/lb.
RICE, Baton Rouge, LA, cwt.
BARLEY, Minneapolis malting, bushel
OATS, Minneapolis No. 2 heavy, bushel
ALFALFA, NW Iowa, lg. sq. prem., ton
SUNFLOWERS, Fargo, ND, cwt.
HOGS, Nat’l basecost cwt. 51-52%
FEEDER PIGS, 40 lbs., nat’l avg., head
CHOICE STEERS, NE feedlots, cwt.
FEEDER CATTLE, Oklahoma City
Steers, 700-800 lbs./cwt.
Steers, 500-550 lbs./cwt
Heifers, 450-500 lbs./cwt
COWS, utility, Sioux Falls, SD, cwt.
MILK, Class III, CME spot MO, cwt.
LAMBS, Slg., San Angelo, TX, cwt.
ENERGY
Ethanol, IA, gallon
Diesel, U.S., gallon
ACTUAL
DOANE FORECASTS*
Last
Week
This
Week
March
AprilJune
JulySept.
3.62
3.76
172.00
3.58
3.56
123.13
3.48
3.43
--
3.60
3.55
--
3.75
3.70
--
3.65
3.60
--
10.16
10.66
383.60
8.73
8.87
272.50
8.49
8.64
270.50
8.75
9.00
280.00
8.90
9.15
285.00
9.00
9.25
290.00
5.22
7.37
5.09
-8.95
6.78
63.22
--3.16
147.50
19.40
64.89
72.66
158.30
4.47
5.92
4.74
-6.12
5.94
58.29
11.35
-2.53
-16.65
62.74
74.48
133.32
4.40
5.84
4.61
-6.00
5.76
56.29
11.35
-2.25
-16.37
63.88
76.48
--
4.40
5.90
4.60
5.20
6.00
6.10
54.00
11.25
5.25
2.40
150.00
16.25
64.00
75.00
137.00
4.50
6.00
4.55
5.25
6.25
6.35
52.00
11.50
5.00
2.45
140.00
16.50
78.50
71.00
133.00
4.60
6.10
4.60
4.90
6.25
6.25
52.00
11.75
5.15
2.25
140.00
16.75
80.00
62.00
130.00
204.07
276.88
256.75
103.25
15.49
147.91
153.70
191.16
182.16
75.75
13.84
125.50
159.30
193.00
183.21
72.50
13.80
134.00
164.00
198.00
190.00
75.00
13.75
--
170.00
194.00
184.00
79.00
13.75
--
175.00
190.00
178.00
70.00
14.75
--
1.30
2.90
1.31
1.98
-1.98
---
---
---
2/27/2015 2/19/2016 2/26/2016
(Monthly & quarterly avg.)
*Average prices expected for the indicated time periods based on available information. Forecasts
will be revised as necessary to reflect changing market conditions. Diesel forecasts from EIA.
Cotton: 9.40 million planted
acres, 8.45 million harvested with a
yield of 812 lbs. per acre for 14.30-million-bale crop. Mill use steady with exports up to 10.7 million bales for
3.60-million-bale carryover. Average farm price of 58 cents per lb., the lowest price since 2008-09.
Cattle: 2016 beef production of 24.58 billion lbs., up 4% from 2015. Total slaughter is projected to rise 3% and
carcass weight increases will continue. Beef exports of 2.48 billion lbs., up 9% versus 2015. Beef imports of 2.85
billion lbs., down 16% from 2015. Average steer price of $133 to $142 per hundredweight.
Hogs: 2016 slaughter supplies are seen up from 2015 on a higher pig crop and more imports from Canada. Pork
production is forecast at a record 25 billion lbs. on steady carcass weights. Exports of 5.13 billion lbs. (up 4% from 2015)
with imports of 1.0 billion pounds. (down 10% from 2015). Average live hog price of $46 to $49 per hundredweight.
Dairy: Low margins at the end of 2015 are forecast to continue in 2016, slowing growth in cow numbers and
yield per cow. Still, output per cow is projected at 22,795 lbs., up 2% versus 2015, for 211.9 billion lbs. of total
production. Prices this year are projected lower for butter, cheese and nonfat dry milk compared to 2015 levels.
News alert and analysis exclusively for Members of Professional Farmers of America® 6612 Chancellor Dr. Ste. 300, Cedar Falls, Iowa 50613-9985
Sr. Vice President, Chuck Roth • Publisher/Editorial Director, Chip Flory • Editor, Brian Grete • Editor Emeritus, Jerry Carlson
Sr. Economist, Dan Vaught • Sr. Economist, Bill Nelson • Sr. Economist, Marty Foreman • Sr. Economist, Gaogao Yu • Sr. Economist, Randy Scollan
Digital Managing Editor, Julianne Johnston • News Editor, Meghan Vick • Inputs Monitor Editor, Davis Michaelsen
Member Relations Manager, Shelley Eilderts • Washington Consultants, Jim Wiesemeyer and Roger Bernard, Informa Economics
Subscription Services: 1-800-772-0023 • Editorial: 319-277-1278 • To record your news alert for PF editors: 1-800-PFA-NEWS (1-800-732-6397)
©2016 Professional Farmers of America, Inc. • E-mail address: [email protected]
CEO, Andrew Weber • President, Kris Carlson
February 27, 2016 / News page 4
February 27, 2016
Cattle
Position Monitor
Feds Feeders
Game plan: 0%
We remain I’160%
0%
o p t i m i s t i c II’16 0%
0%
there will be III’16 0%
0%
a stronger IV’16 0%
hedging opportunity into spring. If
April live cattle futures test the winter or late-fall highs, it would likely
be a hedging opportunity.
Frozen Beef Stocks
540
2014
520
2015
2016
500
480
460
440
420
400
380
360
Dec
Oct
Nov
Sep
Jul
Aug
Jun
Apr
May
Mar
Jan
Million lbs.
Feb
340
Fundamental analysis
The Feb. 19 USDA Cattle on Feed
Report (see News page 3) put the Feb.
1 feedlot inventory at 100% of yearago, with January placements and
marketings declining marginally.
Slow placements during the second
half of 2015 imply tight front-end
supplies. Big declines in steer
weights since October and the large
discounts built into deferred futures
suggest producers will keep marketings current. Thus, we see little
reason to think supplies won’t prove
tight during the March-April period. Conversely, demand could
accelerate, with the grilling season
potentially starting the first weekend in April. The huge second-half
2015 drop in primal loin (i.e., T-bone,
strip steaks) values may also presage a big demand surge this spring.
Daily April Live Cattle
Trend is choppy.
Bulls’ next target is the
December high at $138.95.
A push above that level
would open the upside to the
October high at $144.45.
$144.45
$136.72 1/2
$138.95
The Feb. 4 high at $136.72 1/2
is now initial support. Below
that, key near-term support is
at the 40-day moving average
(green line) near $133.73.
$127.15
$123.05
Hogs
Position Monitor
Lean Hogs
Game plan:
We have 50% of I’16 0%
second-quarter II’16 50%
p r o d u c t i o n III’16 0%
hedged in June IV’16 0%
futures at $78.75. Be prepared to
ramp up coverage and potentially
extend hedges into the third quarter
on a challenge of last fall’s highs.
Frozen Pork Stocks
725
2014
700
2015
675
2016
Million lbs.
650
625
600
575
550
525
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Jan
475
Feb
500
Fundamental analysis
USDA’s Feb. 23 Cold Storage
Report (see News page 3) looked
rather bearish at first glance, since
Jan. 31 U.S. pork stocks leapt 91.3
million pounds from December.
Having essentially matched the
year-ago rise didn’t encourage
bulls, since they hope declining
output and improved demand are
tightening the supply situation.
However, the January stocks surge
averaged 71.3 million pounds during the past 10 years. Moreover,
with Easter on March 27 this year,
the industry probably felt the need
to quickly build ham supplies,
which helps explain the 32.6-million-lb. jump in ham stocks. We’re
still optimistic about the shortterm hog outlook, but worry about
early-spring prospects.
Daily April Lean Hogs
Trend is up.
Clearing the Feb. 18 high at $72.22 1/2 would open
the upside to the October high at $73.97 1/2.
$73.97 1/2
$72.22 1/2
$67.77 1/2
The contract respected the
40-day moving average (green
line) last week, signaling it is
key near-term support. A drop
below that average would open
downside risk to $67.77 1/2.
$59.22 1/2
Feed
Feed Monitor
Corn
I’16
II’16
III’16
IV’16
0%
0%
0%
0%
I’16
II’16
III’16
IV’16
0%
0%
0%
0%
Meal
Corn game plan: We exited the 50% firstquarter hedge in March corn futures at a
loss on Feb. 24. We recommend coverage of
45 to 60 days in the cash market.
Meal game plan: We exited the 50% firstquarter hedge in March soybean meal
futures at a loss on Feb. 24. We recommend
you have meal coverage for 45 to 60 days in
the cash market.
Daily July Meal
The trend is down.
The downtrend from the October high
and the 40-day moving average are key
near-term resistance in the $265.00 to
$270.00 area. Violation of both would
likely trigger corrective buying.
$281.10
The contract is leaning on support at $265.60.
Violation of that level would open the downside to the
2010 low of $251.00 on the weekly continuation chart.
$265.60
Analysis page 1
Corn
Position Monitor ’15 crop ’16 crop
Game plan: Hedgers exited the 15%
buyback in March corn futures Feb.
24. We also recommended a 15%
2015-crop cash sale that day to get to
80% sold in the cash market on oldcrop. Seasonally, futures should
show price strength into spring, but
macroeconomic concerns limit the
upside. Be prepared to advance oldcrop sales and to start new-crop sales
on a challenge of the winter highs.
The drop below the 40-day moving average
(green line) last week makes bears’ next
target the contract low at $3.54 1/4. Below that,
weekly continuation chart support lies at $3.46 1/2.
Fundamental analysis
3-year avg.
Bulls need a close above the
40-day moving average (green line)
near $3.86 to attract chart-based
buying. Tough flat resistance is
at the Feb. 4 high at $3.95.
0.30
0.10
-0.10
65
Dec
Oct
Nov
Sept
Jul
Aug
Jun
Apr
May
Basis March futures
Total Corn Export Bookings
'14-15
55
'15-16
$4.03 1/2
$3.95
USDA
45
35
25
15
July
Aug
June
Apr
May
5
Million metric tons
Contract-low
support is at
$3.74 1/2 and then every
nickel lower from $3.70.
Wheat
Daily SRW May Wheat
The trend is down.
$3.54 1/4
The trend is choppy to lower.
2016
0.50
-0.30
$3.70 1/2
Daily December Corn
Average Corn Basis
0.70
Jan
As we anticipated, USDA’s projection for 2016 corn plantings
published in conjunction with its
Feb. 25-26 Outlook Forum were
put at 90.0 million acres, down
500,000 from its initial December
projection (but up 2.0 million
from the 2015 total). That did little to ease downward pressure
being felt by futures. The size of
last week’s losses was somewhat
surprising, since recent corn
export news has been supportive.
Talk of excessive global feed
wheat supplies and the global
grain market’s bearish situation is
weighing on prices. The favorable
South American weather/crop
situation and looming harvests in
Argentina and Brazil are depressing markets as well. We still think
a seasonal rally could emerge
during March and April.
The $3.70 level has proven to be a pivotal level. A
close above that level could trigger a rebound to the
$3.80 area, which stopped the price recovery from
the January low. The December high at $3.87 3/4
will be tough resistance on an extended bounce.
$3.87 3/4
Jan
Feb
Mar
0%
0%
Trend is choppy to lower.
Mar
80%
0% Daily May Corn
Nov
Dec
Futures/Options 0%
Feb
Hedgers
(cash sales):
50%
Sept
Oct
Cash-only:
The contract could correct to the 40-day moving
average (green line) near $4.73 without it being
more than a modest corrective bounce. Bulls need
closes above the 40-day average and flat resistance
at $4.77 3/4 to signal a low may be in the works.
$5.42 3/4
$3.74 1/2
PositionMonitor
Monitor Position
— All Wheat ’15 crop ’16 crop
Cash-only:
60%
0%
Hedgers
75%
0% 0%
0%
(cash sales):
Futures/Options
Game plan: Our urgency to
advance old-crop sales and to start
new-crop sales is increasing as
there’s more downside price risk.
Fundamental analysis
$5.05 1/4
Violation of old contract-low support at
$4.59 1/4 means next strong support
comes from the weekly continuation chart
in a band from $4.39 1/2 to $4.25 1/2.
February 27, 2016 / Analysis page 2
$4.77 3/4
$4.59 1/4
SRW: Winter wheat futures modestly firmed after USDA forecast
total wheat area at just 51.0 million acres. That was lower than
anticipated and implies a bigger
drop in spring wheat acreage than
expected. This looks like “buy the
rumor, sell the fact” action.
Soybeans
Position Monitor ’15 crop ’16 crop
Game plan: Seasonal tendencies
favor a price rally in the March/
April timeframe. Poor fundamentals and outside market concerns
limit the upside, but we believe
seasonalities are reason to wait on
additional sales for now. If we get
to mid-March without a challenge
of $8.90 to $9.00 in May futures and
$9.00 to $9.10 in November futures,
we’ll likely advise sales anyway.
$12.42 1/2
$8.53 1/2
Daily November Soybeans
Average Soybean Basis
0.80
The short-term trend is choppy.
2016
Near-term resistance extends from
the 40-day moving average (green
line) around $8.85 to the early
February high at $8.98. A close
above the latter level would open
the upside to the $9.10 level.
Basis March futures
0.40
Dec
Oct
Nov
Sept
Jul
Aug
Jun
$9.26 1/2
Total Soybean Export Bookings
The January low at
$8.68 is key support.
Violation of that level
would open the
downside to the
contract low at $8.50.
Daily HRW May Wheat
-0.20
2016 HRW
-0.30
3-year
SRW avg.
Oct
Nov
Aug
Jan
20
3-year
HRW avg.
Total Wheat Export Bookings
'14-15
'15-16
USDA
Million metric tons
15
10
0
$4.86 3/4
Jan
Feb
Mar
5
Nov
Dec
$5.30
July
Aug
Sept
Oct
Contract-low support
is at $4.86 1/2. Below that,
weekly continuation chart
support lies at $4.84 1/2 to $4.77.
25
Sept
30
-0.60
Basis March futures
July
Daily HRS May Wheat
-0.50
June
The contract is leaning
$4.92
on support at $4.52. Next
support would be the 2007 low of
$4.33 1/2 on the weekly continuation chart. $4.52
$5.65
2016 SRW
-0.10
-0.40
The 40-day moving average (green
line) corresponds with psychological
resistance at $5.00, making that
key near-term resistance.
Average Wheat Basis
0.00
Apr
$5.44 1/2
$8.50
May
A bounce off $4.52 could trigger
a challenge of the 40-day moving
average (green line) near $4.71.
$8.68
Mar
Aug
July
Jun
USDA
May
Apr
'15-16
Mar
'14-15
$8.98
Feb
Million metric tons
Jan
Feb
55
50
45
40
35
30
25
20
15
10
Apr
Jan
-0.40
May
0.00
Apr
May
June
1.20
3-year avg.
Dec
1.60
June
HRS: USDA’s preliminary wheat
acreage forecast implied spring
wheat plantings could fall about 1
million acres below industry
expectations. With a 45-bu.-peracre yield forecast, that implies a
45-million-bu. cut in projected
supplies. This was supportive, but
HRS futures still couldn’t rally.
$8.61
May
HRW: HRW prices have continued climbing versus SRW lately,
with the March spread surging
from -16.5¢ to near even during
the past two weeks. This seemingly reflects relative demand
strength, especially after last
week’s export sales data indicated
big HRW sales to “unknown” during the week ended Feb. 18.
$9.02 1/2
The August low at $8.61 is initial
support. If that level is violated,
it could be a quick drop to the
contract low at $8.53 1/2. Below
the contract low, support is at
$8.50 and then $8.38 1/4 from
the weekly continuation chart.
Fundamental analysis
USDA’s preliminary forecast for
2016 U.S. soybean acreage came in
at 82.5 million acres, which was up
500,000 acres from USDA’s
December projection and would
mark a 150,000-acre reduction from
2015. This seems light despite recent
price weakness. We believe soybean
acreage will rise slightly from last
year. Recall that prevented soybean
plantings set a record at 2.232 million acres last year, with the Missouri
total topping 1.0 million by itself. If
the weather behaves, a significant
portion of those acres will probably
be planted to beans this spring.
Despite the acreage cut, soybean
futures continued their early-week
decline, but remained above their
early-February lows. Indeed, prices
have been mired in a narrow range
since mid-December. The eventual
breakout could prove decisive.
The 40-day moving average (green line) around
$8.75 is initial resistance. Above that, there’s a
band of resistance from the $8.90 level to the
Dec. 21 high at $9.02 1/2 that will be difficult to clear.
$9.29 1/4
Mar
0%
0%
Dec
65%
0%
Futures/Options
Nov
Hedgers (cash sales):
The short-term trend is choppy.
Feb
0%
Oct
50%
Sept
Cash-only:
Daily May Soybeans
February 27, 2016 / Analysis page 3
Cotton
Position Monitor
0%
0%
-200.00
Aug
Jul
Jun
Apr
May
Mar
Jan
62.59¢
Total Cotton Export Bookings
13000
'14-15
11000
'15-16
USDA
60.67¢
9000
59.45¢
7000
5000
3000
July
June
April
May
’000 running bales
Jan
Feb
Mar
1000
Nov
Dec
Recent price weakness reflects equity
market losses and pessimism about
demand for U.S. cotton. Although
USDA projects 2016 U.S. plantings at
9.4 million acres, well above the
9.1-million-acre estimate from the
National Cotton Council, a corrective
bounce may have started late-week.
-500.00
Bulls need a close above 59.45¢ to
signal a low is in place. It will be
difficult to clear the downtrend from
the December high on a bounce.
Basis May
futures
-400.00
Aug
Sept
Oct
Fundamental analysis
2016
-300.00
Feb
Game plan: We are behind on
sales. We will increase old-crop
sales and make initial new-crop
sales on a price rebound.
The trend is down.
Dec
Hedgers (cash sales): 35%
Futures/Options
0%
3-year avg.
Nov
-100.00
Oct
0%
Sept
35%
May
Cash-only:
Daily March Cotton
Average Cotton Basis
0.00
June
July
’15 crop ’16 crop
The contract spiked 57.85¢, but that
level is still support. Below that, support
on the weekly continuation chart is in
a broad range from 57.00¢ to 51.00¢.
57.85¢
General Outlook
Economy: According to the widely
followed
Conference
Board
Consumer Confidence Index, U.S.
consumer attitudes have greatly
improved since diving through
much of the 2007-08 financial/housing crisis. However, it fell sharply
from 97.8 in January to 92.2 this
month. The chart at right also shows
recent readings are well below the
January 2015 high at 103.8.
Things become really interesting
when one overlays the index upon
From
the
Bullpen
those for stocks, such as the monthly bar chart for the S&P 500 Index
shown here. Statistical analysis
suggests major shifts in consumer
confidence tend to lead those in the
stock market by about one month.
On the other hand, the chart also
shows stocks didn’t hit their 2015
peak until May. Still, having consumer confidence decline while jitters about the outlook for the
Chinese and global economies
remain high is worrisome.
The Consumer Confidence
Index and the S&P 500 Index
bottomed in early 2009.
The latest consumer
confidence reading
is the second lowest
since December 2014.
by Senior Economist Dan Vaught
Seasonal studies suggest the corn and soybean markets will trend higher during the
coming weeks. Two factors probably play
roles in the historical advance. The first is
cash-related, with stored corn and bean supplies dwindling from their post-harvest
peaks. Spot quotes also tend to rise seasonally as storage charges (either explicit or implicit) accumulate on product held in elevators or
on farms. Premiums built into deferred
futures often reflect the carrying cost.
The Chicago markets also typically build
weather premium into deferred futures,
especially if Corn Belt planting weather
doesn’t cooperate with farmers. Of course,
late spring or early summer drought can
send futures prices soaring. This tendency
for seasonal gains from early March into
July is a big reason we at Pro Farmer favor a
measured approach to pricing and/or selling
old-crop corn and soybeans as well as anticipated new-crop production.
Conversely, we must point out that wheat
market tendencies are a different story, with
both cash and futures quotes for winter wheat
usually declining during late winter and spring.
That probably reflects the tendency for threats
to the crop to diminish with the arrival of
spring. Also, the looming late-spring/early
summer harvest weighs on prices.
Unfortunately, outside markets aren’t helping bulls’ cause. China’s slowing economy is
affecting global commodity demand and
depressing U.S. exports. Strong international
competition is being amplified by U.S. dollar
strength. Huge South American harvests are
starting. Thus, a seasonal rally enabling more
favorable spring/summer pricing is not assured.
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February 27, 2016 / Analysis page 4
Monthly S&P 500/Consumer Confidence
Key Market Items on My
‘To Watch’ List
1) Grain and Oils Crush Rpts.
— Tuesday, March 1, 2:00 p.m. CT
USDA will report corn ethanol and
soybean crush figures for January.
Annual figures will also be released.
2) Export Sales Report — Thursday, March 3, 7:30 a.m. CT
Corn and soybean sales will remain
in focus. Traders’ expectations for
wheat sales are limited.
3) Monthly jobs report
— Friday, March 4, 7:30 a.m. CT
After a disappointing report last
month, investors are watching to
see if the jobs market bounced
back in February.
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