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February 27, 2016 • Vol. 44, No. 9 Grains lower, livestock futures higher for the week — Bears dominated price action in grain and United We Stand profarmer.com Visit your Member website www.profarmer.com for additional perspective and breaking news. News this week... Page 2: Page 3: Page 4: 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.” Follow your Pro Farmer editors on Twitter: Search for #pfnews. @ChipFlory @BGrete @JuliJohnston @MeghanVick @WalstenM @DavisMichaelsen @DoaneAg_Vaught 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. Read Pro Farmer on Friday! Put the news and analysis of Pro Farmer newsletter to work for you as early as Friday afternoon — before it hits the mail. Get Pro Farmer newsletter via e-mail. Call 1-800-772-0023 for details. 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. Monitor Input Prices Pro Farmer’s Inputs Monitor tracks fuel and fertilizer prices in your region and lets you know the best time to lock in prices. Visit InputsMonitor.com or call 1-888-698-0487 for details.