There is still a debate whether high old crop stocks or reductions in new crop planting acres will prevail in price direction (See February 27 entry). The sideways pattern in prices is expected to continue until the stocks and acreage report is released on March 31.
Farmer’s Coop agronomy department reports small shifts in planting away from corn but a very large portion of growers have not made a decision yet This gives me qualms about how accurate and useful the March 31 report is going to be,
On Monday March 3, the Risk Management Association (RMA) set spring projected prices of revenue guarantee crop insurance at $4.15/bu for corn and $9.73/bu for soybeans. For comparison, 2014 prices were $4.62/bu for corn and $11.36/bu for soybeans. Lower guarantee prices will result in lower revenue protection for the 2015 crop year. These prices are calculated as the average trading price of December futures in the month of February and will not change unless December futures are higher in the month of October.
Wheat prices continue to decline as corn prices decrease. Historically, high corn prices have caused substitution of wheat in feed ratios thus increasing the price of wheat. Now that corn prices are lower, feed ratios are using more corn and the demand for wheat is declining, causing the price to drop. The increasing value of the US dollar and favorable weather across the globe are also contributing to wheat’s decline.
Some other interesting news comes from India. India’s wheat crop is down from earlier numbers due to multiple factors. The most interesting factor is that water tables are down due to excess flood irrigation. This may force farmers to shift to less water intensive crops and further reduce wheat acres.
Soybean prices dropped this week with news of the Brazil truck strike might see a conlcusion and soybean shipments to the port of Paranagua increasing to normal levels. Concerns about shifts in planting acreage from corn to soybeans are also putting pressure on soybean prices.
Soybean export estimates from the US are up 3% from last year even though the USDA is estimating a decrease. Devaluation of the Brazilian Real is causing farmers to hold onto soybeans in order to combat the inflation which reduces Brazilian export estimates. However, the continuing increase in the value of the US dollar and the decrease in the Brazilian Real makes Brazilian soybeans more desirable to our export customers.
Some good news for the future. Historical trade notes a somewhat strong tendency for grain values to rally from March 1 into spring in large carryout stocks years (such as this one) as attitudes shift from old crop stocks to new crop production risk.
Average Nebraska agricultural land value dropped 3% in the past year due to decreases in grain prices.
Australian wheat harvest is rising as acreage expands. Wheat production will increase next year as acreage expands and yields increase. Exports may increase to as high as 17.95 million tons in 2015-2016 from 16.9 million tons. This may boost global inventories to high levels and cap any potential rallies.