February 11, 2016

USDA Chief Economist Says Balance Sheets Still Look Good

CBOTYesterday’s USDA reports had one major theme: slow demand. USDA lowered export demand for both corn and wheat in the February WASDE report.  In fact, wheat exports are now expected to be the lowest in more than 40 years.  USDA Chief Economist Rob Johannson:

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And global wheat stocks are up nearly 10.6% year over year. Add that to a 28% increase in U.S. wheat stocks and analysts say you have a real problem on your hands.  The U.S. appears to be sitting on the largest stockpile of wheat since the 2009-2010 crop year.  But what does that mean for price?  USDA is currently projecting a year end price of $5.00/bu on wheat.

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With such low prices persisting, there’s been a lot of talk about net farm incomes. USDA also addressed those issues in a less widely discussed report yesterday, the Farm Sector Income Forecast from the Economic Research service.  The report showed farm profits are expected to decline for the third year in a row.  Again USDA Chief Economist Johannson:

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The bulk of that decline is attributed to losses in animal product receipts, while crop income declines are forecasted around just 0.9%. Still, some fear we may be looking at a wave of bankruptcies.  There certainly are some stresses on balance sheets, says Johannson, but

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USDA World Supply And Demand Numbers Bearish

USDA released their February World Agricultural Supply and Demand numbers Tuesday morning to little fanfare as analysts expected only small changes across the board.  While that was largely true, carryout numbers of all three grains slightly exceeded analysts pre-report estimates:

  Feb USDA Report Pre Report Estimate Range of Estimates January USDA Estimate
Corn 1.837 bbu 1.815 bbu 17.52-1.947 bbu 1.802 bbu
Soybeans 450 mbu 449 mbu 425-491 mbu 440 mbu
Wheat 966 mbu 949 mbu 930-975 mbu 941 mbu


Global stocks of all three major grain categories increased as well.  Notably, USDA did not change their Brazilian soybean production estimate leaving it steady at 100 mmt for the 2015-2016 season.  Analysts were looking for a small decrease.  Argentinean soybean production was increased by 1.5 mmt to 58.5 mmt.


UND Professor Osbourne Speculates On Summer Drought

Leon_OsborneWhile El Nino has brought some much needed moisture to California, the drought stricken southern part of the state is not getting the precipitation that was expected.  Leon Osbourne with the University of North Dakota says the jet stream has pulled the moisture to the north . . .

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Osbourne agrees with a consensus of meteorologists that La Nina is likely to quickly follow the El Nino weather event.  He says that means the drought in the west and California could expand to the middle par to the country later this year . . .

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Meteorologists remain split on the timing of such a swing from El Nino to La Nina, an issue grain analysts say will be vital to causing a summer rally.