The following market analysis is for the week ending April 24.
CORN — When the dust settled after trading a wide range of 26 cents this week, May corn was up three-quarter cents at $3.77 and the December contract was down one-quarter cent at $4.06 3/4.
The week started off with sharply lower crude oil and stock markets, a U.S. dollar at one-month highs against the euro and improving weather conditions. Basic fundamentals for the energy market are bearish with large supplies and weak demand.
Corn planting as of April 19 was only 5 percent versus the 14 percent five-year average. Widespread rain over the weekend of the 25th will keep progress below the average. Today’s planting equipment can quickly make up for lost time and improved genetics should reduce late planting effects on yield potential. Keep in mind last year planting was only 4 percent complete at this time, but the resulting yield was the second highest on record due to the summer growing conditions.
Talk this week centered on uncertainty surrounding how California’s Air Resources Board’s newly adopted Low Carbon Fuels Standard for transportation fuels beginning in 2011 will affect starch-based ethanol usage. The measure calls for greenhouse gas emissions from transportation fuels to be cut 10 percent by 2020.
Concern from the ethanol industry is that this could lead to plummeting demand for corn-based ethanol since indirect land use is included for ethanol’s carbon footprint. California pointed out that they expect corn-based ethanol to still play an important part in their push to lower carbons. There are 11 other states considering similar action. Add to this weak demand and large stocks of gasoline, which will limit how much total ethanol can be blended.
Corn exports were excellent this week at nearly 48 million bushels. Total export commitments gained slightly on last year and are now only 35 percent below those levels.
OUTLOOK — The current new-crop bean/corn ratio at 2.3 favors additional soybean acres this spring, which is more likely in combination with wet conditions delaying planting. The Eastern Corn Belt is experiencing delays to a greater extent than the West. Informa Economics is now forecasting 2009-10 ending stocks at 1.631 billion bushels, comparable to the 2008-09 USDA carryout number of 1.700 billion bushels. The yield and acreage uncertainty keep old prices range-bound until we get further along with planting.
SOYBEANS — Beans were knocked lower as the new week began on the same factors as corn, but ideas of a shrinking 2008-09 carryout figure took over as the price driver as the week progressed and contributed to the soybean recovery.
May beans were down almost 11 cents for the week to close at $10.40 1/4, but dropped to $10.12 3/4 early in the week before staging a recovery. The November contract was only down 1 3/4 cents at the end of the week at $9.33 1/4.
Comments from China relating to bean imports limited the upturn in old-crop beans. The Chinese Ministry of Commerce said traders should slow down on soybean imports due to large inventories at the ports. This goes along with their announcement that the government will extend their policy of buying domestic beans for the reserve until the end of June to support local prices. Production estimates for Argentina were cut again with new forecasts coming in near the 35-million-metric-ton area.
Weekly exports were 22.7 million bushels were good enough to keep us 8 percent above last year on total commitments. Carryout projections for 2008-09 continue to crumple. Informa Economics’ forecast is down to 110 million bushels. The U.S. Department of Agriculture’s April forecast was 165 million bushels. Informa expects both the export and crush lines to increase on subsequent reports. Their 2009-10 carryout projection is 224 million bushels.
OUTLOOK — As long as soybean ending stock estimates are shrinking, it will be difficult to see extreme setbacks in prices. However, the swine flu effect of Russia prohibiting meat imports from select U.S. states may shake the market enough to see long position holder head to the exit, at least for the time being. The energy and equity markets need to be monitored going forward as well.
Nystrom’s notes: Crude oil traded a wide trading range for the week, but only closed down 92 cents for the week at $51.55. Heating oil and gasoline were each down a nickel this week. Natural gas hit 6 1/2 year lows on huge stocks and weak industrial demand. It was down over 43 cents for the week. The Dow was down 29 points and the U.S. dollar was down 1.4 points.
Phyllis Nystrom is a market analyst with Country Hedging in St. Paul.