MARKETS GRAIN
Global markets
Foreign yields affect domestic prices
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By Kevin Riesberg
RJO’Brien
hat an amazing growing season it
has been, causing the grain markets to make a radical transition
from dealing with record-size crops back-toback after a period in recent years of short
crops and minimum carry outs in the U.S. in
both corn and soybeans. Not only is the U.S.
seeing bumper crops, our competition in Europe/Black Sea and South America are looking
at record crops of corn, oilseeds and wheat.
The charts of the U.S. carryout of corn and
soybeans this coming year highlight the old
saying that big crops have long tails and will
not be solved next year unless we have a total
crop failure. After the last few years of record
prices to encourage both the U.S. and world
farmer to increase planting and production, the
job of the market will now be to get prices low
enough to see demand increase and for land
to come back out of production. Corn futures
could stay in a $3.00-$4.00 trading range the
next 12-18 months to encourage shifting acres
to other crops and as cattle/hog herds slowly
rebuild. U.S. export demand is expected to remain slow until next spring with both Brazilian
and Black Sea corn running cheaper than U.S.
corn. Recently, China bought Ukraine corn for
import next spring to avoid the issue with nonapproved GMO corn in the U.S.
So, the U.S. farmer needs to see some production problems show up in South America
this next growing season or in the Black Sea
next summer for us to win back some of our
normal export customers. The current corn/
soybean price ratio for next year should trigger a shift of corn acres back toward soybeans,
especially in the fringe areas of the Corn Belt.
Some private analysts believe that unless
input costs for corn drop from current levels,
we could see a shift of 4 mln acres back into
soybeans and other crops. With a shift of that
size in acres, a normal trend line corn yield
next summer would keep U.S. carryout above
1.6 bln bu thanks to the large carry in from
this year and should keep Dec ‘15 corn under
$4.00. But any adverse weather or sub trend
line yield would snug ending stocks back
toward 1.0 bln. This should keep Dec ‘15 supported above $3.50 until next spring.
The picture for soybeans is less friendly
with record soybean yields and production
seen in the U.S. this fall while record production is expected in South America just six
months. Both Brazilian and Argentine farmers are planting more soybeans because at the
current prices vs cost of inputs, soybeans give
them the better return. Chinese demand for
soybeans is growing, but unfortunately not at
a rate that keeps pace with the large U.S. and
South American production. The U.S. producer needs to see some weather issues plague
South America this growing season to keep
soybean futures from falling under $9.00.
Wheat is caught in limbo with the U.S.
and the world