By ANN HINCH
Assistant Editor CHICAGO, Ill. — Last week’s news of mortgage and banking troubles crept into the agricultural commodities market, as investors were liquidating some futures investments even as USDA reported Friday that America’s current golden crop – corn – is set for record production this fall.
“Everyone’s looking over their shoulder,” explained Ray Huckabay, executive vice president of Linn Group, a Chicago commodities firm.
He said the problems with banks being short of cash created an environment where investors can’t value the assets they own. “The minute (the banks) say ‘We can’t send you any money,’ you’d better get out,” he said.
“This (USDA Crop Production) report comes on the day when we’re seeing some of the highest volatility in the market in the past four years,” agreed James Bower, owner of Bower Trading, Inc. Of its significance, he added, “It’s not what the report actually says – it’s how the market reacts to that report.”
Near-record corn
What the report said is that national corn production is forecast at just under 13.06 billion bushels this year, at an average yield of nearly 153 bushels/acre, approximately four bu./acre over last year.
Forecasted production is 24 percent over last year, when it was just above 10.5 billion bushels. Projected harvested acres are at 85.4 million, compared to last year’s 70.65 million acres.
In the Farm World coverage states, only Michigan is actually losing corn production by nearly 14 percent from 2006 to 2007, with an estimated harvest of 247.5 million bushels. Illinois is posting the biggest gain with a nearly-22 percent lead over last year, at 2.31 billion bushels, which represents almost 18 percent of national production. Iowa, which at 2.51 billion bushels is the single largest grower in the United States, gained 19 percent over last year.
Indiana shows the third biggest gain at 17 percent, or 1.01 billion bushels. Tennessee posted the next-biggest gain at 16 percent, though it still falls far below the other six states in estimated production, at only 74.1 million bushels. Ohio should enjoy a 13 percent gain with 540.5 million bushels, and Kentucky will see a seven percent increase at 160.8 million bushels in 2007.
“This is still a snapshot of a moving target,” said Richard Feltes, senior vice president of MF Global, who explained the corn crop still has to survive through September at its current health to reach these goals. “We’ll be back to trading weather next week.”
Bower added for the past few weeks he’s traveled the Midwest and Delta and that especially in the South, corn and soybean producers “are very, very concerned” about their crop in the heat and drought. Drawing a line through Indianapolis from St. Louis through the Ohio River Valley, he pointed out south and east of that have had little moisture.
“They don’t get rain in the next seven to 10 days in the Delta and the southern Corn Belt, they’re going to have a yield loss in soybeans,” Bower said, questioning the accuracy of USDA’s soybean estimates.
Soybeans down
This is the fourth year in a row that experts have underestimated corn gains, Feltes said. By the same token, it’s the third year they’ve overestimated soybeans, which are estimated to be down nationally 18 percent from 2006, at 2.63 billion bushels, with a decreased yield of 41.5 bu./acre (down from 42.7 last year).
Only a few southern states posted soybean gains, none in the Farm World area.
Michigan had the biggest decrease at 34 percent, with an estimated production of only 59 million bushels this year. Kentucky is down almost 29 percent, to 43.3 million bushels, and Indiana is down nearly one-quarter, to 215.2 million bushels. Ohio and Tennessee posted a nearly-20 percent loss each, with projected production at 175.1 million and 35.3 million bushels, respectively. Illinois is down 19 percent at 390.1 million bushels and Iowa is down 14 percent to 438.5 million. Nationally, there will be fewer acres harvested than last year, down from 74.6 million to 63.3 million.
“We’ve got a bean problem, globally,” Feltes said. He explained while soybean yield has been increasing five of the last seven years, there is such global demand – growing by nine million metric tons per year, according to Bower – that if Brazilian farmers aren’t persuaded to plant more this year, the world will face a tight situation in stocks.
Bower added the value of Brazil’s currency may be too strong to encourage expanded planting. Argentina may be producing as well, but he said Brazil has more pastureland it can open up for additional planting. “I don’t know that Argentina’s going to be as big a tipping point as Brazil,” he explained.
Wheat up
Of corn and soybeans, Huckabay said the USDA estimates are “a little better than an educated guess.” Its wheat numbers, however, have a much better chance of accuracy because the crop was mostly harvested by July 30.
Though national wheat production is down slightly from USDA’s July estimate, it is up 17 percent over 2006, at 2.11 billion bushels. This includes winter wheat estimates for the six Farm World states which grow it (Iowa does not produce enough for USDA to include), and all are forecasted to produce less than last year.
In U.S. production, this is an anomaly, as most other participating states are posting big gains over 2006 – most notably, Colorado, Georgia, Mississippi, Texas, Oklahoma and Nebraska.
This farm news was published in the Aug. 15, 2007 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee. |
