2013 corn, soybean growing season echoes 2003 | Marketing content from Corn and Soybean Digest

Baseball great Yogi Berra once said, “It’s like Déjà Vu all over again.” Yogi had a funny way of saying nonsensical things that made perfect sense, and I have a Yogi sense for the 2013 soybean crop – it’s 2003 all over again.

In early August 2003, the Corn Belt was in very good condition. July weather had been tame, and the corn and soybean crops looked great. As I walked a farm show in Minnesota, a light rain fell and I remember being concerned about mud on my shoes. Little did I know it would be the last significant rain to fall in August and September.

July makes the corn crop. In 2003, despite a dry August and September, a corn crop with great potential still ended up good. August makes the soybean crop and, in the same year, a soybean crop with equally great potential at the end of July produced the worst yield in 10 years.

Does this sound familiar? While I don’t believe the dryness in 2013 has been as extreme, in terms of the timing and trend in crop conditions, it’s 2003 all over again.

soybean crop condition, 2003-2013

Late season dryness has put life into the soybean market, but only the soybean market. During the month of August, while Nov’13 soybean futures gained $2 per bushel, Dec’13 corn futures managed to rise 15 cents. At least the market rose – Dec’13 wheat futures actually declined by 15 cents per bushel. So far, this is a “soybeans only” party.

The sharp rise in soybean prices creates a noteworthy price spread between soybeans and corn. Nearby soybean prices are nearly 300% of corn prices, high by any historical standard. If this ratio endures, it could have a big impact on 2014 plantings, leading a shift away from corn and towards soybeans. The soybean/wheat price spread is also high, promising to boost the trend away from planting wheat and towards soybeans in traditional wheat states like North Dakota and Kansas. Pricing anomalies create incentives, and current prices are an incentive for more soybean acres in 2014.

While 2013 looks a lot like 2003, some things have changed in the past decade. In early 2014, South America will harvest a soybean crop 60% larger than the 2003 crop. Brazil is now the largest exporter of soybeans in the world market. The stiff competition we faced in 2003 is even greater today. Four months from now, a big South American crop might be the cold shower that tempers soybean prices.

While your mind is focused on harvesting the current crop, I can’t help but look ahead to possibilities in 2014. Is the “short crop, long tail” phenomenon creating another early pricing opportunity in soybeans? While no actions have been taken to date, my eyes are on the soybean market and 2014 opportunities.

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Today grain future

Corn futures closed steady on the day. It was a quiet trading day for the most part, with the Dec 13 contract establishing only a 5 cent range on the session. Reports of better than expected yields as harvest continues to roll on have continued to limit upside price action over the last few sessions. As always, the question is whether the USDA yield estimate, regarded as high by some at the time, already reflected much of the “better” yield. Earlier this morning, wires reported that Taiwan’s MIPA group purchased 60,000 MT of Brazilian Corn from Cargill. The DTN National Corn Index was UNCH from the previous day at $4.21.

Dec 13 Corn closed at $4.39 1/4, up 1/4 cent,
Mar 14 Corn closed at $4.52, up 1/4 cent,
May 14 Corn closed at $4.60 1/4, up 1/2 cent
Jul 14 Corn closed at $4.67 1/2, up 1/2 cent

Soybeans finished moderately higher across the board, with the front month Nov 13 contract posting an impressive 14 cent gain on the day. The front month Oct 13 Meal contract found some additional follow through from yesterday and posted a double digit gain of $10.20. Talk of improved export demand due to potential reductions in Argentina provided the catalyst. The EU levied a stiff tariff on imported biodiesel from Argentina, leading some to expect a reduction in Argentine crush. The DTN National Soybean Index was down $0.05 from the previous day at $12.25

Nov 13 Soybeans closed at $12.88 1/4, up 14 1/2 cents,
Jan 14 Soybeans closed at $12.89, up 13 1/4 cents,
Mar 14 Soybeans closed at $12.70 3/4, up 13 1/4 cents,
May 14 Soybeans closed at $12.50 1/2, up 11 1/2 cents,
Oct 13 Soybean Meal closed at $427.80, up $10.20,
Oct 13 Soybean Oil closed at $40.01, up $0.89

Wheat futures finished 1 to 3 cents higher on the day. The KCBT Dec 13 contract traded up to $7.64 at one point but was unable to hold a firm bid at higher prices and only finished with gains of a penny. The CBOT Dec 13 Wheat/Dec 13 Corn spread gained another 3 cents to close at $2.50. The spread is now up over 75 cents since the lows set back in late August. FAO pegged Argentina’s wheat crop at 9.5 MMT, which was well below the USDA’s estimate of 12 MMT. Earlier this morning, wires reported Japan purchased 118,456 MT milling wheat. US Wheat was said to make up 72,054 MT of the weekly MOA purchase.

Dec 13 CBOT Wheat closed at $6.89 1/4, up 3 1/4 cents,
N/P KCBT Wheat closed at $7.55 1/2, up 1 cent,
Dec 13 MGEX Wheat closed at $7.50 1/4, up 3 1/2 cents

Forage Export Market Grows | MARKETING content from Hay & Forage Grower

The forage export market is getting larger, “and that’s good news for growers,” said John Szczepanski, director of the U.S. Forage Export Council (USFEC), a subcommittee of the National Hay Association (NHA).

But USFEC, made up of 29 Western U.S. forage export companies, is working to overcome some potential customers’ misperceptions of, and lack of information about, U.S. hay. Szczepanski updated NHA members on his progress at their mid-September annual meeting in Salem, OR.

“Total U.S. (hay) exports are about $1.3 billion,” he said, with Japan’s purchases at half that amount. “It has been a significant market and, historically, the lead market. But, increasingly, we see growth in China and the UAE (United Arab Emirates), and I would say that represents a quarter of our market.” South Korea accounts for another quarter of U.S. hay exports.

China’s appetite for dairy products has increased in recent years. But its dairies are located near heavily populated areas closer to the coast, while the country’s grassland regions are farther inland.

“It is cheaper for China to import quality product” than transport its forage to the coast on an insufficient road system, Szczepanski said. The country annually spends $200-$250 million on U.S. hay purchases. “The U.S. still provides quality product, and it’s important that our industry keep up that quality and keep up the safety standard.

“But I met with Chinese officials who said, ‘Right now we’re buying product from you; in the future, we will sell to you,” he cautioned the group. According to some reports, the Chinese may accept Roundup Ready alfalfa imports as soon as next fall or early 2015, he added.

Middle Eastern countries look to buy more U.S. hay in part because they can no longer afford to use their few water resources to raise the crop themselves. “They really need to be buying from outside, and that could be the U.S. The U.S. has developed a good reputation in most parts of the Middle East, but that market could be expected to grow.”

In Saudi Arabia, one newspaper report suggested an increase in alfalfa imports of 2.6 million tons in the next couple of years. Szczepanski has heard numbers closer to 3 million tons.

“They want 3 million tons of alfalfa. The U.S. exports 3 million tons of everything, so, obviously, Saudi Arabia and other countries in the Middle East are developing contacts, not only in North America, but in North Africa and Europe. We’re going to be playing in an increasingly global environment.”

Szczepanski strives to identify governmental, academic and trade association contacts to help USFEC’s export companies, from three Western hay-growing regions, gain access to foreign markets. A third of those companies are located in northern region – in Washington state, Oregon and Idaho. Another third, in Oregon’s Williamette Valley, make up the central region. California export firms make up the southern region.

USFEC doesn’t promote individual companies; it presents them as a united export entity, he said. Szczepanski works with countries to set up protocols and procedures and clear export obstacles so member-companies can effectively export product.

At a Japan trade show last October, his staff surveyed hay importers, asking if they felt U.S. forage was “safe or very safe” and whether they were willing to pay for a safe product. The majority said that they did, but only 68% intended to buy U.S. forage in the next 12 months.

Part of the problem may be that information – such as how U.S. growers produce good-quality hay – gets lost in translation from buyers to end users. It could give end users “skewed” views of U.S. forage, he said.

Rather than advertising, USFEC has worked with the editors of Japanese dairy and beef magazines, providing them with article ideas to educate end users on U.S. hay products.

“In 2012, people came to us and said, ‘We noticed the quality here is not as good as it was before. We understand the United States is shipping more product to China and the Middle East.’

“The implication was that we were sending better product to those other markets.” They hadn’t heard of the challenging weather conditions that U.S. growers faced last year, Szczepanski added.

Japanese importers are aware when a half-inch of rain falls in hay-growing regions of the U.S. He hopes that magazine articles will also help keep their end users informed and repair some of the mistrust of American-grown products.

As an example, he told of a farmer who complained that the dry timothy imported from another country was “a lot of work.” But, he added, he didn’t trust American hay because “it looks too good. It’s obvious you’re putting chemicals all over it and I’m not going to buy it.”

Szczepanski explained that the hay may have been produced under irrigation. But the assumption was, “if it looks good, there’s something wrong with it. We’ve got that reputation built into the Japanese mindset that U.S. product is overly chemically treated. We need to work through that.”

September Hay Prices Ease A Bit, USDA Reports | MARKETING content from Hay & Forage Grower

U.S. hay prices trended downward in September, according to USDA’s monthly Agricultural Prices report released last week.

At $176/ton, the all-hay price for the month was down $4 from the August price and $9 from last September’s. Alfalfa, at $194/ton, was $6 lower in price than it was in August and $12 below the September 2012 price.

New Mexico registered the highest alfalfa price, $246/ton, among the 27 reporting states. Colorado, Missouri and Texas tied for second-highest price at $235/ton. The alfalfa price was lowest in North Dakota at $118/ton.

Two Upper Midwestern states had significant month-to-month increases in alfalfa prices. In Wisconsin, the price jumped $40/ton, from $160/ton in August to $200/ton in September and neighboring Minnesota’s price rose by $25/ton, from $165 to $190.

The national average corn price dipped in September. At $5.28/bu, the price was down 93 cents/bu from last month’s total and $1.61/bu below the September 2012 price.

Oregon Hay Grower Rebounds From Late Start | MARKETING content from Hay & Forage Grower

A season-long battle with wet weather crimped hay quality for many growers in northeastern Oregon during 2013. But Mark Butterfield, who grows timothy and alfalfa hay on 650 acres near Joseph, says higher yields more than make up for it.

Early summer rains delayed Butterfield’s first timothy cutting by five days, and he was about a week late starting first-crop alfalfa. The past two weeks, he again waited out the weather to start second-cut timothy and third-cut alfalfa. “Ordinarily, we’d be wrapping up for the year right about now.”

But his yields are likely to be substantially higher this year compared to normal. “We should end up getting 6 tons/acre on our alfalfa and about the same on our timothy. For both crops, that’s a ton more than we ordinarily get. Quality is off some, but the increased tonnage should more than make up for that.”

Butterfield, president of the Wallowa County Hay Growers Association, markets 3 x 4 x 8’ hay bales to export buyers, dairies and beef feedlots. “Demand is strong right now, and the prices are pretty good across the board.”

Currently, his first-crop timothy is bringing $245-260/ton at the farm. Last year, his top price was $245. “We were some of the last people to get going (on first crop), but we hit the right weather window. The weather damage in other parts of the region helped out with the price.”

He’s still waiting to price his alfalfa, but figures his test and top-quality export hay should bring at least $200/ton. Feeder hay will fetch above $175/ton. “Overall, I’d say it’s shaping up as a pretty good year.”

Butterfield can be reached at mbutter.