Corn Still Rules

    Towards the end of March, the USDA came out with their quarterly estimates of U.S. corn and other grain inventories, and those numbers created some surprises, which we hear is not unusual. It did shake up the grain and feeder cattle markets though. 

It is said that, dating from March 2010, 11 of the past 13 quarterly stock estimates have been both much larger and much smaller than generally expected, and this past estimate was no exception. These estimates are used by many – from the farmer and cattle feeder to the Chicago and Wall Street brokers and investors – and can make some a lot of dollars, or it can be a big loss for others.

The Farmland Forecast came out on March 28, forecasting corn stocks well above analyst expectations; they projected corn stocks of 5.40 billion bushels – 400 million bushels above analyst’s average estimate as of March 1 and a 10 percent decrease from the same time last year. Of the total stocks, 2.67 billion bushels were stored on farms, down 16 percent from 2012. Off-farm stocks were at 2.73 billion bushels, down four percent from a year earlier. They said December 2012 to February 2013 disappearance was 2.63 billion bushels compared to 3.62 bushels a year ago. I can’t fathom 400 million bushels, never mind 5.40 billion bushels. This forecast brought wheat, soybeans and, of course, corn prices down, and feeder cattle jumped five bucks, especially the larger yearlings. 

All three grain prices dropped 40 to 50 cents in the first week of April as a result of the forecasts, but wheat took the biggest hit. Investment Bank, Goldman Sachs said it lowered its three-month price forecasts for Chicago Board of Trade corn futures to $6.50 per bushel from $7.50 previously, and its six and 12 month price forecasts for corn to $5.25 from six dollars. They also lowered their price outlooks for wheat and soybeans.

This past week, feeder cattle futures closed moderately lower in spite of lower corn prices. This was caused by weakness in the fat market along with the overbought conditions and a large premium to cash weighed on the feeders. August futures for feeders took the biggest hit. Since the last week in March, all classes of cattle went up and then down, so everyone expects costs to stay high. Even corn jumped up a little the middle of last week.

Some good news in the Corn Belt is that with the late spring, fertilizer prices should stay steady, and farm income is expected to reach a record high in 2013. In March, bankers indicated that cash rents will increase by over nine percent in 2013. 

In the Corn Belt irrigated lands prices are still jumping, along with the non-irrigated, enough so some bankers are now starting to talk about a bubble and when it may burst. Grain prices have been strong – even strong enough to make up for the production loss due to the drought. That is bad news for the livestock people and good for the farmers. 

Farmers now have cash and nowhere to invest it but in farmland or tractors, but some signs show that they are taking on more debt also. As usual the future in farming is hard to predict. 

Dennis