Very few changes took place to the corn balance sheets in the May supply and demand report. Old crop carryout increased a slight 24 million bu as elevated exports were more than off-set with a decrease in food, industrial, and seed use. Surprisingly, the U.S.D.A. did not adjust ethanol or feed demand on corn as many analysts expected. The initial new crop carryout number on corn was released at 1.75 billion bu, and while this is a decrease on the year, is still a plentiful amount.
Among all of the things that grain producers have to think about while planting this year’s crop, here’s one more thing to contemplate: What is my lender looking for when he or she is making a loan to me?
The Agriculture Department announced the April Federal order Class III benchmark milk price Wednesday at $15.81 per hundredweight (cwt.), up 25 cents from March, $8.50 below April 2014, but $1.59 above California’s comparable 4b milk price, and equates to about $1.36 per gallon, up from $1.34 last month and compares to $2.09 a year ago.
U.S. milk production continues to top year ago levels but may be slowing. Preliminary data in this week’s March Milk Production report shows output in the top 23 producing states at 16.9 billion pounds, up 1.1 percent from March 2014. The 50-state total, at 18.1 billion pounds, was up 1.2 percent from a year ago.
California’s dairy processors, through the Dairy Institute of California (DIC), dove into the Federal Milk Market Order debate this week by offering an alternative proposal to one recently introduced by three of California’s largest co-ops, California Dairies Incorporated, Dairy Farmers of America, and Land O'Lakes. So have the California Producer Handlers Association and Ponderosa Dairy.
U.S. dairy exports remain near two-year lows, but shipments rebounded a bit in February compared with the prior month, according to the latest data from the U.S. Dairy Export Council (USDEC). Exporters shipped 137,576 tons of milk powders, cheese, butterfat, whey and lactose in February, down 14 percent from a year ago, but up 21 percent from January on a daily-average basis. Total overseas sales were valued at $434 million, down 26 percent from last year, but up 20 percent from January (daily average).
Even though the official numbers were just released, we continue to see a wide range of estimates on this years production and carryout possibilities. For corn, most yield models are using harvested acres from 81 to 83 million acres. If correct, we would need to see a trend yield of near 169 bushels per acre to prevent a sizable draw-down in reserves. This is especially true if acres are at the bottom end of this range, as a carryout close to 1 billion bu on new crop is possible.
The United States continues to see heavy competition in the global market for corn business. China has recently been a heavy buyer of Ukraine corn, even though the corn is higher priced than what is being offered into the global market from the United States. China is willing to pay his premium to avoid potential GMO issues when the corn is brought in for unloading. It is not out of the question that Chinese importers are buying larger volumes of Ukraine corn now in case it is not available later in the year.
We are starting to see more of a division in the market between old and new crop contracts. Old crop supplies of both corn and soybeans remain adequate, even if we would see a slight increase to usage from current estimates. For new crop we are seeing more interest in corn, as there is very little risk premium in that commodity, and the global stocks to use is not as bearish as some analysts claim it to be. The same is not true on soybeans, where a large South American crop is expected to weigh on values in the foreseeable future.
Police this week revealed a threat to poison New Zealand milk products in an apparent protest over pest control. HighGround Trading’s Eric Meyer reported that it was revealed that Fonterra and Federated Farmers received threatening letters last November, along with milk packages that tested positive for the poison. While police said the threat could be a hoax, the New Zealand government made very clear that all potential threats like this are taken seriously. Prior to the announcement, trading of dairy securities and derivatives on New Zealand listed exchanges were halted.