October 2, 2014

QualiSoy Offers Tool To Decide If Identity Preserved Soybeans Are For You

Facing lower soybean cash prices this year, farmers are looking for opportunities to add to their bottom lines. Growing identity-preserved (IP) soybeans is one option for additional profit opportunities, but the costs can seem overwhelming to farmers thinking about getting started.

U.S.-soy-industry-led board QUALISOY developed a calculator that can help farmers determine how much profit they can add by growing IP soybeans, including high oleic varieties.

The calculator, based on a Purdue University study, helps farmers navigate the typical steps required to produce and segregate IP soybeans and gives them an estimate of added profit potential. The United Soybean Board’s Value Task Force funded the study.

“The charge of the Value Task Force is to try to find the next big thing that could really create opportunities for soybean farmers, and we feel that there is a lot of opportunity in IP soybeans,” says Dan Corcoran, a soybean farmer from Piketon, Ohio, and chair of the Value Task Force. “Whether a farmer has ever grown IP soybeans before or not, this tool will help determine the potential value that is out there.”

This calculator, available for use on http://soyinnovation.com/inputs-handling/, also gives a quick look into the limited costs associated with growing IP or high oleic soybeans.

“The soybean calculator is easy to access and has straightforward questions,” says Corcoran. “It takes you on a logical path to get a basis for non-IP products and what it takes to deliver a crop. Then it goes into the additional costs and revenue associated with growing IP soybeans.

“This tool helps you make an educated business decision by removing a large amount of guesswork. It gives soybean farmers a good overview of exactly what we need to invest when we choose to grow IP.”

Right now, opportunities available for soybean farmers to grow IP include non-GMO, food-grade and high oleic soybeans. However, high oleic soybeans have easier handling procedures compared with other IP soybeans. The calculator takes those factors into consideration when delivering its results.

“With the current state of soybean prices, it is important for soybean farmers to grow a product that has increasing demand,” concludes Corcoran. “This concept of growing a product that customers are demanding is beneficial for farmers in general.”

The 70 farmer-directors of USB oversee the investments of the soy checkoff to maximize profit opportunities for all U.S. soybean farmers. These volunteers invest and leverage checkoff funds to increase the value of U.S. soy meal and oil, to ensure U.S. soybean farmers and their customers have the freedom and infrastructure to operate, and to meet the needs of U.S. soy’s customers. As stipulated in the federal Soybean Promotion, Research and Consumer Information Act, the USDA Agricultural Marketing Service has oversight responsibilities for USB and the soy checkoff.


NASS Releases Their Quarterly Grain Stocks; Small Grain Summary Reports

The National Ag Statistics Service released its Grain Stocks report, showing 1.24 billion bushels of old crop corn in all positions as of September first, up 50 percent from a year ago.  Of the total, 462 million bushels were stored on farms, and 774 million bushels were off the farm, with both numbers higher than last year.  NASS also reported 92 million bushels of soybeans in storage, down 35 percent from last year.  Of the total stocks, 21.3 million bushels of soybeans were stored on farms and 70.6 million bushels were stored off the farm, and both of those numbers were down significantly from 2013.

NASS also released the Small Grains 2014 Summary.  Growers harvested 46.5 million acres of wheat this year, up 3 percent from 2013.  The levels of production and changes from 2013 by type are winter wheat, 1.38 billion bushels, down 11 percent; other spring wheat, 601 million bushels, up 12 percent; and Durum wheat, 57.1 million bushels, down 2 percent.  NASS will re-contact small grain growers in eight states, including North Dakota and South Dakota who reported unharvested acreage in the September NASS survey. If the responses received result in changes to the current estimates, NASS will publish updated acreage, yield, production and stocks in the November 10 Crop Production report.


Weekly Market Commentary With Miller Risk Management

Grain markets stabilized a bit this week, although it appears to be more of a “corrective” effort than any true desire to go higher. USDA reports on Monday showed the official start of harvest, and with it, attention will firmly shift to proving, or disproving, as the case may be, ideas of what the 2014 crop will look like.  More on that below, but in general anecdotal evidence is fully compatible with yield ideas that were published earlier this month.  Weather forecasts added little support as temperatures were warmer than normal in many locations and rains were limited to spotty occurrences.  That same trend will allow many areas that are lagging in maturity to advance with little interference, particularly in northern cornbelt areas.

As for those USDA reports, soybean harvest was about in line with expectations and average at 3% complete while corn harvest lagged at 7%. That sounds more bullish than it is, as 1) its very early in the season with dry weather ahead and 2) large crops have historically lagged average by some amount.  Both the record crops of 1994 and 2009 ran behind average for much of the season, and that seems to be the case this year as well.

Lastly before we get to crop specific news, outside markets. We don’t typically address outside markets much in this letter but there are a few exceptions and one is this week.  The U.S. dollar continues to skyrocket, showing the largest rally in years over the past few weeks/month.  There are a lot of reasons for this, but the primary one is that the U.S. economy looks comparatively strong against the backdrop of a more than likely double dip recession in the EU and less than stellar numbers out of Asian.  It’s a flip from a few years ago.  Then the U.S. was pushing stimulus packages to revive the U.S. and avoid deflation, but the cost of those efforts was a devalued dollar (making exports cheaper, more attractive to importers).  The shoe is on the other foot now, and the EU is attempting similar, if not more frantic measure to pump some life into their economy.  Their measures include not just an easing package like we saw in the U.S. but also negative depository rates as a disincentive to keep cash.  The actual programs started a few months ago, but the EU economy has seen little to no improvement, in fact worsening by some measures.  That was underscored when ECB president Mario Draghi on Thursday hinted that further measures may be needed and some analysts speculated that the Euro may already have slipped into deflation, which is very difficult to control once started.  The end result is buyers from the U.S. suddenly possessing less purchasing power and that’s a big shift from just 4 or five years ago.


Soybean prices continued to flounder this week although there were some token efforts to move higher on Tuesday and Wednesday before prices collapsed to new contract lows once again. In the end, the fact that U.S. carryouts are projected to more than triple from last year won out.  Harvest is just getting started in some locations but by and large, early yield reports are fully consistent with the 46-47 bushel national yield that analysts had been discussing leaving little reason to feel optimistic.  As mentioned above, weather is pretty cooperative right now and without any major delays its expected that by this time two weeks from now, harvest will be in full swing with many producers still having a significant number of bushels to price.

That’s not to say there was no bullish talk in the market, just to say that what is bullish probably isn’t enough to make a difference. Some analysts pointed to the belief that planted acreage could be lowered by as much as 2 million acres in next month’s WASDE report, but with U.S. carryout projected well north of 400 mbu, many traders have a “so what” type attitude.  Additionally, the relatively high price of soybeans when compared to corn continue to encouraged expanded plantings through South America (who will start planting for their early window in the next week or two) and even in the U.S. for the 2015 season.  Export sales so far this year were a bit short but caught up to pace on the announcement of the huge soybean “purchase” by the Chinese last week.  The hype didn’t match up though, and traders for the most part moved past it, in fact hitting new contract lows just shortly after the export numbers were released and then doing it again Friday.

From a technical standpoint, that new low is an important feature. The very modest correction attempts were easily beaten back, underscoring how hard it is to find any interested buyers right now.  That collapse will define this week’s high of $9.42 in November as a pivot point of sorts, as it will mark a narrow, but corrective high that could become a goal in the future.  The building supplies are also starting to widen spreads, with a 10 cent carry to hold beans until November, but quite frankly, that’s still very narrow and probably not enough to entice a lot of storage on the part of producers who could carry corn bushels for the same amount of time and not experience nearly the shrink that they will see on the soybean bushels.



Corn prices also slide to new contract lows this week, but not nearly in the same dramatic fashion that soybeans did. In fact, despite the ramping up of harvest pressures, corn prices remained with about an 8 cent or so range for the lead contract, showing little incentive to move one way or the other.  Yields themselves are not disappointing by any stretch, but the fact is the bulk of the “damage” may already be priced in.  That’s not to say we have no chance of going lower, we probably will.  It does however, look like the losses we see from here on out will be more moderate and likely fueled more by sympathy with soybeans, etc than any real desire to go lower on their own.

There are two reports in the near future that could affect corn prices, the first being Tuesday’s USDA Quarterly Stock numbers. Over the past two years, this report has been pivotal, but that’s unlikely to be the case this year either for corn or soybeans as carryout of both continues to grow.  The report will mark the final ending stocks number for the 2013 crop year in both commodities.   Obviously, some will be looking at the soybean number out of curiosity (there’s not a lot of faith that USDA’s WASDE numbers got it right), but outside of that, the final numbers simply don’t matter much because traders are confident that we will/are seeing more than sufficient supplies coming in right now.  The second upcoming report will be the October WASDE numbers which will be more important as they offer the chance for 1) a revision in yield (likely higher) and 2)many analysts look for an acreage adjustment.  The acreage adjustment itself is a possibility, although we doubt that it will be as much as the 1.5 to 2.0 million acres that many seem to be looking for.  It may, however, be enough to offset any higher yield estimates that come out at the time leaving the balance sheet less bearish than it would have otherwise.

While demand isn’t of much concern at this point in the crop cycle, it will be an important feature going forward and for that reason, we think it’s important to provide at least a cursory view of what’s going on. In terms of exports, USDA is leaving the demand unchanged at this point and that seems wise given how early in the year we are.  So far, the pace is a bit slow, but not unexpectedly slow as many buyers typically wait until harvest is in full swing before getting too carried away.  Also, it’s worth noting that in other “cycles” where the U.S. has regained tremendous ground coming off a short crop (2012 short, 2013 regained demand), the second year coming out typical doesn’t change a whole lot, probably as the market absorbs the sheer growth.  In terms of ethanol production, we are fairly optimistic that USDA won’t change the 2014 projection in this coming report.  There are a lot of variables surrounding that right now, but in general, we don’t look for a big slide from 2013 either.  Wednesdays’ EIA report did reflect a severe dip in ethanol grind, but stocks were extremely high and many plants start maintenance for a short period during September in order to gear up for heavier usage.  We look for that number to climb in the coming weeks, although perhaps slowed by the stocks number.


Wheat prices were similar to the pattern in corn this week, stabilizing after last week’s losses but unable to avoid setting a new contract low on Monday. From there, it was a narrow trading range for the week of 14 cents in the Dec Mnpls contract while KC Dec was a little wider at 18 cents.  Realizing that most of you are not growing SRW wheat, I do find it necessary to mention that that market stayed narrowly traded but actually set it’s contract low Thursday before trading an inside day on Friday.  In any event, the corn and wheat market remain closely tied together as feed grain supplies throughout the world remain extremely abundant.

The early week lows were stabilized as news was released that the Egyptians had tendered for a smaller amount of U.S. originated SRW wheat. By itself, the sales doesn’t mean much, it wasn’t that big and if anything, the U.S. is a bit slow in attracting exports this year.  However, it did mark the first time in MONTHS that the world’s largest buyer of wheat had turned to the U.S. for any supplies and as such, marked this week’s low as a sort of guideline on where we might attract purchases.  So far, the EU and Black Sea remain very competitive, however, so it’s far from assured that this buying will continue.  In fact, the rising U.S. dollar is affecting wheat far more than either corn or soybeans for this very reason.  Every time we move low enough to attract buyers, the U.S. dollar continues to move higher and offsets some of the benefit we had.  While we would expect that the market will not be controlled completely by currency fluctuations, its is important to note that it is the currency of our top competitors that is falling the most on the world market (the Ruble and the Euro), so the effect is not negligible.

As for world news, there wasn’t much out this week aside from the fact that Russia has announced it will start making “intervention” purchases of grains in the country starting next week. Harvest for them is around 76% complete and while the top end estimates of their crop have come down, they still look like they have produced around 55 mmt of wheat for this year and around 3.5 mmt of corn (these numbers are Russia only, not Ukraine).  Also, due to the sanction and currency issues, their crop is very cheap on world markets, but very expensive to their own people and they have hinted at a desire to start stockpiling more grains in an effort to control prices.  At this time the intervention purchases are expected to total 5 mmt of grain, although the government has not specified how much of what.

USDA will issue its quarterly grain stock numbers on Tuesday of next week. While the number is the year end carryout for corn and soybeans, it’s simply the first quarter estimate for wheat and therefore will be analyzed but not weighted nearly as heavily as other numbers.  Below is a table with trade expectations:

Item Actual Avg Guess Range of Guesses Previous
Corn   1.185 1.020-1.350 1.181 (per Sep S&D)
Soybeans   126 100-150 130 (per Sep S&D)
Wheat   1880 1707-1980 1870 (year ago)

As you can see, the expectations for wheat are for a small increase from last year, but nothing major. Also it should be noted that while Canada’s 2013 wheat crop remains exceptionally large, the top end of those estimates has come down as well, offering a bit of hope going forward. The problem, as we’ve stated before, for U.S. HRS markets will be the quality issues that developed this fall and may prevent some buying interest from typical outlets who can easily turn to Canada.

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Miller Risk Management is a subsidiary of Clayton Pope Commodities of Champaign, IL.  If you have any questions, please call Katie at 701-730-3352