Tucker Talk: May 1

Eggs

Corn

United States corn planting was slightly behind at the beginning of this week but ideal weather this week, and furious corn planting, may increase national corn planting progress to the historical average for the week (47%) by next Monday.  Planting efforts have halted most selling of old crop stocks which has caused basis to firm up in the eastern corn belt.  Once planting is done and if farmers start selling old crop again, basis levels can be expected to weaken again and prices could decline.

Now that we are trading May, there is likely to be some major fund positioning ahead of the May 12th USDA supply and demand report.  Historically, the May S&D report is one of the most anticipated of the year because it gives us the first official look at the new crop balance sheets.  Current estimates heading into this report have corn ending stocks from last year at 1.7 billion bushel.

 Soybeans

Grain hubs in the hub port of Rosario Argentina were “dead in the water” yesterday by the second day of pay strikes by unions associated with docking personnel and harbor captains.   Strike participants are demanding wage increases in line with annual inflation rates of 20-30%.  The strikes are occurring right in the middle of corn and soy harvest seasons.   Argentina is the world’s top exporter of soymeal livestock feed and its No. 3 supplier of raw soybeans so the strikes could create upward pressure on world prices.

There is talk that current soybean demand is under-estimated on old crop and ending stocks will be reduced creating bullish pressure on the market.  The story is different for new crop with higher-than-expected yields being reported out of South America which would generate bearish pressure on soybean prices.

 Wheat

Wheat prices have taken a major blow over the last month.  At the beginning of April, wheat prices in the United States were estimated at being up to $0.50-$0.80 over the rest of the world’s wheat prices causing importers to buy wheat from other sources.  The result was a drop in the prices in order to be competitive.

Check out the Nerbaska wheat crop report here: Crop Report April 30 2015

The latest drop in wheat prices is due to talk of the reduction in the Russian wheat tax before the deadline of July 1.  The export tax was implemented by the Russian agricultural service in order to protect domestic supplies when production was expected to be lower than normal.  The result was a reduction in Russian wheat exports by more than half what they were before the tax.  However, Russian wheat production is estimated at 59 million tons (almost par with 2014) and global prices are much lower than expected when the tax was implemented.  In response, there is talk of reducing the tax and possibly eliminating it before July 1.  If the Russian tax is reduced or eliminated, Russian wheat will be the cheapest in the market thus placing more bearish pressure on wheat prices. Read more here.

 Avian Influenza

The bird flu (avian influenza H5N2) that has been sweeping across the United States may be the worst in American history.  As of April 28, more than 15 million birds in 91 flocks in the US have been lost due to outbreaks of avian influenza.  These include losses of nearly 4 million turkeys, and 11.4 million chickens.  On Thursday April 29 there were unconfirmed reports that another 5 farms (5.5 million egg hens) had been infected and will have to be eliminated.

The impacts of reduced flock numbers on the grain markets is minimal.  It is estimated that there will be a loss in feed usage of 0.23%.  For comparison, the PED virus in hogs caused a loss in feed usage of 0.74%.  The major impact will likely be seen in egg prices with a 1.62% loss in market eggs.

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