We find corn in a conundrum this week as it is facing two different supply/demand situations. The first situation is a decrease in estimated feed usage thus an increase in estimated 2014-2015 ending stocks. Reports also have producers holding 50% of last year’s crop hoping summer weather will result in higher prices. Price prediction models predict up to a $0.50 decline in old crop futures if ending stock projections increase to 2 million bushel from the current 1.8 million.
The second supply/demand situation is tightening of new crop projections. Lower prices may reduce plantings, below average weather forecasts are reducing estimated yields, and new crop export projections are increasing. The major questions is do large ending stocks pull price down or does the tightening new crop situation pull prices up. Everyone is waiting for the USDA acreage update on March 31 to answer this question.
Wheat is not doing anything terribly exciting, except going down of course. Egypt canceled a tender last week and bought a tender on Tuesday this week causing prices to fluctuate but have not stopped the downward trend we are seeing.
Moisture is looking good for world wheat production with no large impacts expected. Cold temperatures may result in spotty winter kill in southern IA, central IL, central NE, and central IN but no major losses are expected. Overall world wheat production looks good and the downward trend in prices is no surprise.
There were some interesting things happening in Brazil this week. Soybean prices went up on Monday due to truck strikes over new Brazilian diesel fuel taxes. Prices quickly retreated at news of a judge threatening to issue a back to work order. Effects were not expected to be significant but the strike continued well into Thursday, significantly reducing truck arrivals at the port of Paranagua (from 900 trucks per day to 50). The Brazilian government wanted to negotiate but could not determine who was leading the strike. News this morning (Friday) says that law enforcement officials have begun arresting and citing protestors which has led to a reduction in road blockages. Truck traffic to Paranagua is increasing but there are still 42 shipping vessels waiting to be loaded.
Further support for increasing soybean prices comes from the deteriorating situation involving taxes and inflation in Brazil. Brazilian farmers are holding increasing numbers of soybeans to combat increases in inflation and taxes. Demand for soybeans should shift to the US but traders seem content in waiting out the Brazilian trucker strike.