Grains Surge in March Created by rrummel on 4/1/2014 4:33:30 PM
Courtesy: Colvin and Company
Corn, soybean, and wheatprices all increased throughout March due to uncertainty in Ukraine and strongfundamentals. Tension in Ukraine, the fifth largest wheat producer and thirdlargest corn exporter in the world, greatly affected wheat and corn prices thismonth. Farmers in Ukraine are reportedly hoarding grain as a hedge againstpotential currency issues moving forward. Additionally, Crimea contains fivemajor ports which could cause export issues in the future. Up to 20% ofUkrainian farmland may go unplanted this year due to lack of farmer funding,according to the Ukrainian Community Advisory Board.
Within the U.S., logisticproblems and delays have been occurring on railroads due to the significantrail car traffic and shortage of rail cars created by domestic oil production.All railroad users are feeling the effects. Ethanol plants within the Corn Belthave been reportedly bidding over $5,000 per rail car, if even able to securethe cars for use. Additionally, temperatures have remained below average,limiting the Mississippi River thaw and usage.
May corn prices surged by8.4% throughout March and closed at $5.02 per bushel, its third consecutivemonthly gain. Very strong export sales thus far in the marketing year led USDAto decrease ending stocks in the March WASDE Report by 25 million bushels to1.456 billion bushels. On March 31st, the USDA estimated that 91.7 millionacres of corn will be planted for the 2014 crop year in the U.S., a decrease of4% year-over-year due to strong profits by planting soybeans this year. USDAalso estimated 7.01 billion bushels of corn were stored in all positions as ofMarch 1, 2014, a 30% increase from 12 months prior due to the record 2013crop.
The May soybean contractincreased again this month by 3.5% and closed at a record high $14.64. The USDAdecreased ending soybean stocks by 5 million bushels in the March WASDE Report,due to increased exports. Currently, ending stocks are now estimated at 145million bushels. Farmers are predicted to plant 81.5 million acres of soybeansthis year, up 6% from 2013, due to the favorable price ratio to corn, accordingto the USDA's Prospective Plantings Report. Additionally, USDA stated soybeansstored in all positions as of March 1, 2014 at 992 million bushels, down 1%from 12 months prior.
May wheat prices significantlyincreased this month by 15.8%, closing at $6.97 per bushel, primarily driven bythe uncertainty surrounding Ukraine. In early March, USDA did not make anychanges to the balance sheet of wheat in the monthly WASDE Report. USDAestimated that U.S. farmers will plant 55.8 million acres of wheat in 2014,down 400,000 acres from last year. Wheat stored in all positions was estimated15% lower as of March 1, 2014 by USDA to 1.06 billion bushels.
South American CropCondition
Estimated soybean productionin both Argentina and Brazil were each increased this month by 500,000 tons to53.5 mmt and 84.5 mmt respectively, due to improving soybean conditions,according to Oil World. Mixed conditions of very dry and very wet throughoutlocalized regions have kept recent estimates below January 2014 estimates.
Brazilian corn has beenhampered by dry weather conditions in the south and southeastern regions ofBrazil, while heavy rains have impaired the second-crop corn in Mato Grosso.The Argentinean corn harvest is 7% behind where it was last year, due totorrential rains. Despite the harvesting difficulties in Argentina,expectations are high for the corn crop in 2014, due to favorable weatherduring growth.
Short delays are stilloccurring throughout Brazil and Argentina due to the lack of adequateinfrastructure. Argentina's Rosario Port Authority estimates that delays willpersist for several weeks due to a vessel running aground early this month.
The Creighton Universityfarmland price index decreased to 40.9 from 41.7 this month. Uncertainty overwhen the Federal Reserve will increase interest rates has attributed to thedecline of the farmland index, which declined for the fourth month in a row.Equipment sales have declined to their lowest levels since May 2009, due to thedecline in farmer income in 2013. Professor Goss stated, “Slight upturns inagriculture commodity prices over the past several months have yet to boost theRural Mainstreet Economy. We will need to see additional increases in farmcommodity prices to push the agriculture based economy back into healthy growthterritory such as was experienced in 2012 and early 2013.”
Throughout spring, we havebeen consistently sourcing strong buying opportunities in farmland. Sellers whoare trying to sell their land prior to planting are now in a rush to do so. Theunofficial buying season of farmland will end as soon as farmers are able toturn their attention to planting from the farmland market.
Outlook Planting season is nearing and farmers have been busypreparing by making final decisions on the crop to be planted and types ofinputs to use. We will closely monitor the weather as southern states willstarting turning planter wheels within weeks, but any significant precipitationthat occurs in late April will immediately delay planting. We also look forwardto the continued thaw of the riverways to help improve domesticlogistics.