March USDA crop report continues ‘how low can crop prices go’ watch

By Aerin Einstein-Curtis contact

- Last updated on GMT

© iStock.com
© iStock.com

Related tags: Soybean meal, Wheat

US feed crop prices are tightened, as predictions of large ending supplies and stocks continue.

The March US Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates report​ did not offer many domestic supply changes or suggest a return to higher feed crop prices.

The continuing stories playing out for this year’s feed crop include interaction with the stock and commodities markets, the global economy and the weather, said Chris Hurt, professor of agricultural economics at Perdue University.

There is some expectation that the bottom prices for commodities could arrive this spring, he told FeedNavigator. Calendar year prices for corn and soybeans are reaching nine-year lows at this point and wheat prices could mean an upturn in use of wheat for animal feed.

Time to buy?

It may be time for animal producers to consider corn call options, futures or soybean meal, said Hurt.

“I would at least suggest this is worth thinking about it,” ​he said. “We could see slightly lower prices, but now is the time I’d like to be thinking about that.”

“December corn was $3.79 at the close today, and $3.80 call is priced tonight at $0.29 a bushel, so to get the guaranteed right to buy at today’s price is about $.29 a bushel,”​ he said. “If the price goes up a dollar and a half they’re guaranteed the right and if it goes down [it isn’t an obligation].”

The world economy has had stagnate or slowing growth since December, and the US dollar continues to be strong, creating a poor market for export, he said. “What we see is you can’t build a strong case that demand is going to be strong for our basic feed commodities,”​ he added.

“Some are suggesting that we’re going to get a turn around, that prices are so low that some production will be cut back and low prices start to stimulate usage, but the world doesn’t have the economy and they’re not going to buy from the US [because of the strong dollar],”​ said Hurt.

Crop details

The US wheat crop is holding steady, said USDA officials. Exports for hard red winter wheat have been increased by 10m bushels, while exports for hard red spring wheat dropped 10m bushels.

The ranges for projected season-average farm prices have been trimmed by $0.05 on both ends for corn, sorghum and barley, they said. “The midpoint for the projected corn price remains $3.60 per bushel,” ​they added.

Soybean production has been set to 3,929m bushels, a drop from last month, said officials. But, ending stocks for 2015/16 have been raised 10m bushels from last month’s projections.

Additionally, crush has been reduced by 10m bushels based on the lowered expectation of domestic soybean meal disappearance, they said. But, meal imports have been raised to offset the crush.

“Soybean and soybean meal prices are reduced this month and the projected ranges are narrowed,” ​said officials. “The US season-average soybean price for 2015/16 is projected at $8.25 to $9.25 per bushel, down 5 cents at the midpoint. The soybean meal price is projected at $270 to $300 per short ton, down $5 at the midpoint.”

Without a strong or increasing demand, questions about feed crop supply come from acreage planted and yield or the influence of weather, said Hurt.

Weather may offer some concern as high temperatures can reduce corn crop yield, he said. But spring and summer forecasts are variable at this point.

There is some projection for a dry spring stretching across the eastern Corn Belt, but that won’t necessarily damage crop growth, he said. Predictions for rain in the southern plains could mean strong pasture production and a good wheat crop.

Future planting

More information about US crop growth and production should be known after the release of the USDA’s upcoming crop expectations report, said Hurt. It is set to be published at the end of the month.

However, winter wheat was already down 3m acres from planting last year, he said. There are some thoughts that much of the land will be planted in corn and some in soybeans.

“I think corn will not be up as much, maybe up 0.5m acres and soy up 1.5 acres,”​ he said. “So we’re up 2m acres.”

Soybeans may offer farmers a better return per acre than corn, but margins are tight, he said.

He continues to watch the export market, especially for corn, he said. What has been sold or exported this year marks a drop of about 25% from the previous year, which means there will need to be some acceleration to meet the USDA’s prediction of sales being 12% down.

“For the soybeans, we’re pretty much in alignment with USDA at this point,” ​he said. “All their numbers are achievable.”

Global perspective

Global wheat supplies have been reduced by 3.3m tons based on a downturn in production, said USDA officials. But wheat production is expected to remain a record.

Global wheat consumption for 2015/16 has been lowered by 2m tons, they said. “With supplies declining faster than total use, ending stocks are lowered 1.3 million tons but remain record large,”​ they added.

Expectations for worldwide supplies of feed grains have dropped by 1.6m tons, said officials. Production was reduced based on the corn crop from South Africa and Philippines.  

However, consumption amounts and some global imports are expected to increase, they said. Ending stocks have been lowered, with corn amounts down 1.8m tons.

Global oilseed production is predicted down slightly from last month, said officials, with soybean production part of the overall drop. But soybean crush is expected it increase.

Soybean meal exports from Argentina have been increased, they said. Predicted imports are set to increase for the EU, Pakistan, Mexico and South Korea.

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