Corn Prices Come Off Lows

Corn rose 0.7% Friday as investors bet that favorable weather that has led to the best crop conditions in the U.S. in four years won’t last. Bloomberg News

Corn prices got a respite from a recent slide as investors bet that the favorable weather that has led to the best crop conditions in four years won’t last.

Corn for July delivery rose three cents, or 0.7%, to $4.47 a bushel on the Chicago Board of Trade on Friday, two days after rolling to an almost four-month low.

Ample rain during the planting season has the Agriculture Department forecasting the yield for the 2014-15 crop at 165.3 bushels an acre and production at 13.935 billion bushels, both records. Recently, three-fourths of the U.S. crop was in good or excellent condition, the best rating for this time of year since 2010. That has driven corn prices down 14% from the peak of $5.215 a bushel in late April.

But traders say the outlook could change with the weather.

“Statistically, these early ratings aren’t the most accurate indicator of where the final crop is going to end up, so there’s a hesitancy to push down prices too much,” said Jason Britt, the president of brokerage Central States Commodities in Kansas City, Mo., who also works on his family farm in northern Missouri.

A weather system moving into the U.S. may bring hot, dry weather to the southern Plains and the Ohio River Valley, Joel Burgio, a meteorologist at agriculture-data provider DTN, said in a note to clients on Friday. But that dry weather may not affect Iowa and Illinois, the biggest corn-growing states.

Traders may have good reason to be skeptical. The weather was ideal in May and June of 2012 before one of the worst droughts in U.S. history took hold in July and devastated the corn crop, cutting yields to the lowest level in 19 years.

Too much rain can also be a problem. If excessive precipitation hits some parts of the Corn Belt, it could flood fields and cause crop losses, said Gail Martell, an independent weather forecaster in Whitefish Bay, Wis.

History isn’t on the side of the government forecast. In 2010, favorable weather led the government to predict a yield of 163.5 bushels an acre in June. Though conditions that summer remained mostly normal, farmers collected only 152.8 bushels an acre, according to the USDA. The weather this year would have to be nearly perfect to achieve the record yield forecast by the government, said Ted Seifried, the chief market strategist at brokerage Zaner Ag Hedge in Chicago.

Write to Tony C. Dreibus at tony.dreibus@dowjones.com

Advertisements

International Food Trader – Global market coverage on specialty crops pulses, popcorn, sunflowers, and more!

China 2013 Total Bean Production Estimate: Part Three
131106-pulse-report-china-2012-dry-bean-crop-economic-analysis-part-three-fairman

The third installment of IFT’s China bean production overview from industry analyst Dr. Randall Fairman reporting from China.

By Dr. Randall Fairman

Overview

This article is the last in a three part series on the China dry bean industry.

  1. China Dry Bean Production Overview
  2. China 2012 Dry Bean Crop Economic Analysis
  3. China 2013 Total Bean Production Estimate

Background

Over the past year, Fairman International Business Consulting has had the privilege of serving several people from the international dry bean industry. It has been our privilege to travel with foreign professionals in the dry bean industry and visit many farmers, processors and exporters in various regions of China. Our analysis is 100% based on publicly available information from the China customs database and our personal observations as we traveled with industry professionals. This report is simply a compilation of our observations over this past year.

Historical Production Totals and Production Trends

China exports nearly all of the kidney beans it produces. Figure 1 shows China’s bean exports over the past 15 years. It is clear that over the past 15 years there has been a significant increase in kidney bean production and exports, but there isn’t a noticeable trend over the past 5 years. One major goal of this article is to provide a reasoned estimate of what this graph might look like next year, after the 2013 exports have been completed.

image001

Figure 1 – China Dry Bean Export History

Conventional wisdom and trends in 2013

In early spring 2013 we visited the major bean growing regions and spoke with processors and farmers about their 2013 planting intentions. In our spring planting intentions report we found throughout all bean growing regions that planting intentions were quite high due to the elevated prices at the time of planting. Our conclusion at that time was that 2013 planted area was going to be at an all-time high. Mung beans had large leftover stocks in the warehouses, so we anticipated a higher percentage of kidney beans for the 2013 crop.

In summer 2013 we followed up with a brief survey of actual planting and found that the majority of farmers had followed through on their planting intentions. With a little bit of good weather we fully anticipated a record year for China kidney bean exports.

In the latter half of the 2013 growing season, HeiLongJiang Province, which is the primary growing region for kidney beans, experienced excessive rains and ultimately flooding. The initial reports about these weather impacts were quite grave and the general consensus seemed to be that the 2013 kidney bean crop would suffer significant losses. We heard of losses ranging from 30 to 60% due to the adverse weather conditions. As we traveled the region with industry professionals, we did see that the weather would have an impact, but we estimated it would be on the low end of the estimates we heard.

2013 Production Estimates

Upper Northeast Production Region

Based on planting intentions in the upper northeast region, we had anticipated a significant increase in overall production. It appears that the adverse weather patterns of 2013 will offset the increased planted area and this region will produce about the same quantity of beans that it produced in 2012.

Central Production Region

The central production region experienced good weather patterns and saw an increase in planted area in 2013. This region is very strong in Dark Red Kidney beans and so production of this variety is likely to be higher than normal this year. Because this region accounts for only 10% of China’s total bean production, it will not significantly impact total production, but it will make a significant impact on Dark Red Kidney bean production.

image003

Figure 2 – China Dry Bean Production Regions

Overall Assessment

Our 2013 export estimates are shown in Figure 3:

  1. Chinese Kidney beans and all other beans in the HS071333 tariff code will be exported at their five-year average due to increased planting and poor weather.
  2. Mung bean exports are estimated to be 30% below the five-year average due to decreased planting and poor weather. Actual production numbers are expected to be significantly less than this, but there was a lot of carryover stock from last year.
  3. Adzuki beans are estimated to be 15% below the five-year average as a result of average planting and poor weather.

image005

Figure 3 – 2013 China Dry Bean Export Projections

2013 Bean Variety Production Numbers

Black beans

Black beans had a small reduction in total planted area in 2013 and the weather had a fairly significant impact on their production. Total production in 2013 is around 20% less than 2012 production.

White beans

Yunnan province total production of large white kidney beans remains unchanged. The varieties of white beans grown in the Northeast (including Japanese white beans) fell sharply and the overall reduction is estimated at 40% due to a combination of reduced planting and poor weather.

Specialty kidney beans

  • The 2013 planting area for dark red kidney beans was above average, with normal weather conditions across all planted areas. Total 2013 production is approximately 15% higher than 2012 production.
  • Purple speckled kidney beans are up around 35% despite poor weather thanks to a sharp increase in planted area.
  • Long light speckled kidney beans are up around 15% despite poor weather thanks to increased planted area.
  • Round light speckled kidney beans are down around 15% because of poor weather.
  • Cranberry beans, grown primarily in XinJiang, saw 2013 production increase about 10% over 2012 production due to increased planted area and good weather.

Looking Ahead

Figure 4 shows the trends in China dry bean export prices over the past 15 years compared with the FAO Cereals Index over the same time period. At current prices, dry beans are an attractive option for the Chinese farmer. As high grain prices worldwide continue to draw farmers from the west into corn production, it seems that kidney bean prices may continue to increase. In the short term, it seems rational that China may continue to be a preferential location for bean production because of the relatively high labor requirements. As China’s standard of living and labor costs reach parity with the west, it seems likely that we will see a shift toward more domestically consumed agricultural products.

image007

Figure 4 China Dry Bean Export Price Trends

In the very near term, there are a number of competing factors that will determine planting for 2014:

  1. Many Chinese farmers planted more beans this year based on anticipated prices. Due to adverse weather, they harvested less than they thought they would. Some of the other crops such as soybeans were less affected by the adverse weather and so they performed better. This experience may steer many farmers away from kidney beans in 2014.
  2. Kidney bean prices in 2013 have been very high and farmers are rapidly selling their crop. Even though many planted less area in 2013, they still made a good profit overall. If prices continue high through March 2014, it seems likely that farmers will again plant kidney beans extensively.
  3. In the regions where beans are grown, the government will offer a minimum price guarantee for farmers who plant corn in order to minimize the risk to the farmer. This policy for corn was instituted in 2008 and it can be seen in figure 5 that the minimum price guarantee has thus far been keeping up with the increased export prices for kidney beans. The minimum guaranteed price for corn at time for planting compared with the higher risk estimates for kidney beans will affect farmers’ planting decisions.

image009

Figure 5 – 5 Year China Dry Bean Price Trends

Check back in April of 2014 for our planting intentions report!

Wheat, corn surge on fears Ukrainian unrest may cut exports – WSJ.com

Wheat, Corn Surge on Fears Ukraine Unrest May Cut Exports

BF-AG935_CMDGRA_G_20140228162710.jpg

A wheat field in Ukraine during last summer’s harvest. Wheat prices rose 2.9% and corn gained 2.1% Friday. Bloomberg News

Wheat prices rose 2.9%, the biggest gain in three weeks, amid concerns that unrest in Ukraine will slow grain exports from the country and that cold weather will hurt U.S. output.

Corn prices also climbed Friday, reaching a fresh five-month high.

Grain traders speculated that Ukraine’s shipments of wheat and corn could decline amid mounting tensions between the country and Russia, which could boost overseas demand for U.S. crops. So far, the unrest has yet to directly affect exports from Ukraine, which is expected by the U.S. Agriculture Department to be the fifth-biggest exporter of wheat and the third-largest shipper of corn in the current marketing year.

“This unrest could disrupt the ports and shipments, and if that would be the case, the U.S. could see a substantial amount of demand,” said

Ted Seifried,

chief market strategist at brokerage Zaner Group in Chicago. “At this point, the U.S. and [Ukraine] are the two most competitive countries as far as wheat and corn are concerned. It would be a really big deal” if Ukraine’s exports fell.

Wheat for March delivery at the Chicago Board of Trade rose 16.75 cents to $5.99 a bushel, notching the biggest percentage increase since Feb. 4.

Corn futures for March delivery rose 9.50 cents, or 2.1%, to $4.5750 a bushel in Chicago trading, the highest close for a front-month contract since September.

Wheat prices also gained Friday on speculation that freezing weather in the central U.S. will hurt winter-wheat crops that lack a protective blanket of snow. Temperatures in parts of the Midwest are expected by private forecaster Telvent DTN to be much below normal for this time of year through Wednesday.

While snow is predicted to fall in the coming week, offering some protection for crops in major wheat-producing states such as Kansas, low temperatures the past two months have potentially damaged plants that were seeded in the fall and are set to start growing again in March and April.

Friday’s gain marked the first for wheat futures in four sessions. Prices had stumbled 6% since Feb. 19, weighed down by concerns about increased global production of the grain. Canada harvested a record crop last year, while Australian growers collected their third-biggest crop.

Soybean futures gained, following corn and wheat higher, as stockpiles before the harvest will still be at historically low levels amid rising demand for U.S. inventories. Soybean futures for March delivery added 20.75 cents, or 1.5%, to $14.1425 a bushel in Chicago.

Write to Tony C. Dreibus at tony.dreibus

Feds to Central Valley farmers: Expect no water this summer | Breaking News | FresnoBee.com

Feds to Central Valley farmers: Expect no water this summer

The federal Central Valley Project on Friday made an unprecedented irrigation forecast — zero water this summer for 3 million acres in the Central Valley at the heart of the state’s $44 billion farm industry.

Federal leaders blamed a record-setting drought for the potentially devastating cutback. San Joaquin Valley farm officials say the industry could lose hundreds of millions of dollars and jobless rates in some rural communities could soar above 50%.

Ron Jacobsma, general manager of Friant Water Authority, representing east Valley farm districts, said growers have been on the edge of their seats for months.

“These zero declarations had been widely anticipated, but they still come as a terrible shock,” he said.

The extreme dry winter has left the Sierra Nevada snowpack at 29% of average for late February. Major reservoirs in Northern California are less than half full. The U.S. Bureau of Reclamation, owner and operator of the CVP, has little water to offer.

“This low allocation is yet another indicator of the impacts the severe drought is having,” said bureau commissioner Michael L. Connor.

In Fresno County, the country’s biggest farm county with more than $6.5 billion annually in products, the announcement hits hard, said Ryan Jacobsen, executive director of the Fresno County Farm Bureau.

Mayor Robert Silva in Mendota on Fresno County’s west side said he feared many social problems will follow if people are under the stress of being out of work.

“This is going to have a wide impact,” he said. “The crime rate will climb. You’ll see more spousal abuse in the home and truancy at schools.”

The 400-mile-long CVP is a system of dams and canals stretching from Redding to Bakersfield. The Valley’s west-side farmers buy water from Northern California, and east-siders buy from Millerton Lake.

Federal farm water contractors in the Sacramento Valley also have been given a zero allocation forecast.

If several storms hit California in the next two months, water could become available for delivery, federal leaders said.

But they also are balancing the needs of cities, ecosystems and water quality in places such as the Sacramento-San Joaquin River Delta.

City customers will receive 50% of the amount of water they use historically, officials said. Many urban areas buy federal water, including Fresno, Orange Cove, Coalinga, Huron, Avenal, Lindsay, Strathmore and Terra Bella. Other customers include Tracy and the Santa Clara Valley.

Wildlife refuges in the Sacramento and San Joaquin valleys will receive 40% of their allotments. It amounts to nearly 170,000 acre-feet of water.

One acre-foot is about 326,000 gallons, enough to supply an average San Joaquin Valley family for 12 to 18 months.

West Valley landowners who decades ago traded their San Joaquin River water for Northern California water will receive 40% of their allotment — about 350,000 acre-feet. These farmers have a higher priority for water because of their historic river rights.

But most west-side contractors, such as 600,000-acre Westlands Water District, can’t expect any water. Westlands’ contract calls for more than 1.1 million acre-feet. Drought and environmental water needs have prevented the delivery of a full allotment in most years since the early 1990s.

Westlands growers are expected to fallow at least 100,000 acres and pump nearly 600,000 acre-feet of water from their wells.

Farmer Dan Errotabere, a member of the Westlands board, said he will run his wells aggressively to keep his crops alive, though he does not like to overpump the groundwater.

“We’re going to fallow acreage,” he said. “But we still will have to overpump. We don’t like to tax the water system out here like that. You wind up losing wells.”

On the Valley’s east side, 15,000 farmers are facing their first summer without San Joaquin River water since Friant Dam was constructed and formed Millerton Lake more than 60 years ago. Entire orchards may be lost in the east-side citrus region.

Gov. Jerry Brown last month declared a drought emergency, and state and federal agencies promised funding for suffering communities and farmers. President Barack Obama made his first visit to Fresno last week, bringing attention to the problem.

Andy Souza, chief executive officer of the Community Food Bank based in Malaga, said the government’s help will be needed. He said the Food Bank passed food to more than 14,000 people a month in 2009 when west-side agriculture got 20% of its water allotment. This year will be worse, he said.

“We learned a lot of lessons in 2009,” he said. “We have been preparing for this, and we think we might be providing subsistence for 20,000 to 25,000 people a month.”

The reporter can be reached at mgrossi or @markgrossi on Twitter. Staff writer Robert Rodriguez contributed to this report.

B. regards

Felix Seo

As California’s Drought Deepens, a Sense of Dread Grows – NYTimes.com

NORDEN, Calif. — Cattle ranchers have had to sell portions of their herd for lack of water. Sacramento and other municipalities have imposed severe water restrictions. Wildfires broke out this week in forests that are usually too wet to ignite. Ski resorts that normally open in December are still closed; at one here in the Sierra Nevada that is actually open, a bear wandered onto a slope full of skiers last week, apparently refusing to hibernate because of the balmy weather.

On Friday, Gov. Jerry Brown made it official: California is suffering from a drought, perhaps one for the record books. The water shortage has Californians trying to deal with problems that usually arise midsummer. With little snow in the forecast, experts are warning that this drought, after one of the driest years on record last year, could be as disruptive as the severe droughts of the 1970s.

Under state law, that would allow the governor to “waive laws or regulations and expedite some funding,” said Jeanine Jones, deputy drought manager for the state Department of Water Resources. “It does not create a new large pot of money for drought response or make federal funding available.”

Signs of drought are everywhere, affecting vast sectors of the economy. A sense of dread is building among farmers, many whom have already let fields go fallow. Without more water, an estimated 200,000 acres of prime agriculture land will go unplanted in Fresno County, according to Westlands Water District officials. Cattle ranchers accustomed to letting cows graze on rain-fed grass have had to rely on bought hay or reduce their herds.

Clergy of all faiths have been exhorting the faithful to pray for precipitation. “May God open the heavens, and let his mercy rain down upon our fields and mountains,” Bishop Jaime Soto, the state’s Roman Catholic conference president, said last week. The Sacramento Valley chapter of the Council on American-Islamic Relations followed suit by announcing that area mosques would offer the traditional rain prayer, Salatul Istisqa.

California gets much of its water from the snowpack of the Sierra Nevada, so towns like this one have a front-row view of the problem. The base at Donner Ski Ranch, a family-owned resort with limited snow-making capacity, was less than a foot of snow this week. Usually, it would be several feet deep in January, like at other resorts in the Sierras.

“This is the worst I’ve ever seen,” said Lincoln Kauffman, 55, the resort’s general manager, who has been skiing in these mountains since the early 1970s. “I think 1976 and 1977 were comparable to this — that was a really tough one. I remember the restrictions on showers and flushing toilets.”

Near Sacramento, the Folsom Lake water reservoir has shriveled so much that remnants of a Gold Rush-era ghost town are now visible. The San Juan Water District, which serves communities near Sacramento and relies on water from Folsom Lake, has asked customers to reduce their water usage by 20 percent and in some areas cease all outdoor watering. In Santa Cruz, some 75 miles south of San Francisco, the city banned restaurants from providing customers with drinking water unless it is requested. In Glendora, near Los Angeles, but also in Humboldt County in far Northern California, firefighters have been battling wildfires that normally do not happen during the winter.

“We still have extreme fire conditions throughout the state in January,” said Dennis Mathisen, a spokesman for the state’s Department of Forestry and Fire Protection. “This is definitely not the norm for us.”

The snowpack plays a critical part in what is one of the world’s most sophisticated and complex water delivery systems, supplying water to more than 25 million people and the $44.7 billion agricultural industry. The snow that piles up on the Sierra Nevada’s 400-mile range during the winter acts as a reserve that starts to melt in the spring. The melting snow drains into rivers that feed reservoirs below, providing water to densely populated communities hundreds of miles south of here in Southern California.

Given the snowpack’s significance to the state’s farmers and water boards, winter snow surveys are carried out monthly with great fanfare starting every January. In a ritual that often makes it on to the front pages of newspapers in California, the chief snow surveyor, Frank Gehrke, measures the depth of the snowpack every month by plunging aluminum tubes into the same spot along Highway 50 in the Sierra.

After the first survey this month, the Department of Water Resources said that the snowpack was only 20 percent of the historical average.

The state’s lack of precipitation has been caused in large part by a high-pressure zone stretching along the coast from Oregon down to northern Mexico. The zone acts like a mountain range, blocking storm systems from striking land. Storms are pushed instead north into Canada and Alaska, contributing to the extreme cold weather seen in recent weeks across much of the Midwest and Northeast. While such high-pressure zones are normal during the winter, they usually dissipate and reform, allowing storms to blanket the state in snow and rain.

“We’ve got a ridge of high pressure sitting overhead, and it is not budging,” said Diana Henderson, a forecaster with the National Weather Service.

In Truckee, a ski resort town near here, the Back Country store was holding a clearance sale for mountain bikes, which some people were riding this winter instead of skiing.

“These should be sitting on the shelves this time of the year,” an employee, Aaron Breitbard, said of CO2 cartridges used to inflate flat tires in an emergency. “But they’ve been selling. And, as you can see, we’re building one bike and repairing another one.”

About a hundred miles west of here, the relics of Red Bank, a Gold Rush-era town that, according to California State Parks, included a mine, winery and dairy, now lie exposed on the dry bed of Folsom Lake. A few dozen locals had come to look at nails, glass and bricks scattered here and there.

“Everybody’s been talking about how low the lake is,” said Ramone Velazquez, who was visiting with his wife, Mariana, and their young daughter, Juliet.

“I’m really worried about how this drought is going to affect us,” he said. “I heard about the drought in the ’70s, and how people couldn’t water their lawns and wash their cars. They could take only one-minute showers.”

“Can you believe that?” his wife said. “We’re used to taking an hour.”

Norimitsu Onishi reported from Norden and Malia Wollan from San Francisco.

Seo