News & Commentary
February 22, 2014
We’ve had an impressive wheat rally the last couple weeks. Condition ratings declining combined with decent demand has gotten a lot of people excited. Wheat has been very dynamic as tightness in rail car supplies and a decent export & domestic demand are putting a lot of upward pressure on the wheat markets. However with the current rally our export competitiveness has waned and the demand side of the equation may back off some for now. Also keep in mind once winter is over the Hard Red Spring crop in Canada and the Northern US may come crashing down on us.
The USDA Ag outlook forum on Friday gave us a peek at what USDA feels is happening in the Ag world for 2014.
USDA is projecting a slightly larger overall US wheat crop and a decrease in export and feed demand, this to increase US ending stocks for next year. Although U.S. wheat ending stocks for 2014/15 are projected 5 percent higher than last year, at 587 million bushels, they are still expected to remain below levels seen in recent years. As recently as the 2009/2010 crop year, ending stocks for wheat was 976 million bushels and a 48.4% stocks to use ratio. So there would seem to still be potential for wheat prices to stay firm. However USDA is projecting the average farm price for the 2014/15 wheat crop at a National average price of $5.30 per bushel, down $1.50 from last year.
That, for me, highlights what we need to focus on in wheat. Without a crop production failure this year, wheat prices face a fairly dramatic potential price decline. So even though today all is well as our local prices have reached as high as $6.75, next season could bring a different story.
USDA projected corn production up in 2014 to 13,985 million bushels. That is higher slightly than last year, but as always the devil is in the details. USDA is using a baseline yield of 165.3 bushels per acre on harvested acres of 84.6. This yield would seem somewhat optimistic given the dramatic yield variability we’ve experienced the last few years. Using the baseline projections USDA has 2014/15 ending stocks at 2.11 billion bushels and a national average price of $3.90 per bushel for next year. That would be some $0.60 per bushel down from last year.
Before we get too excited there are some who feel that they have probably understated the possible acreage and overstated yield,s but in the end will still be fairly close to the actual stocks. Needless to say though the corn markets need some good old fashion weather scares to get the prices much higher.
As always keep your eyes and mind open. Today’s markets change rapidly and unpredictably. With all the world unrest everything can change in an instant.
Till next time,