1. Art and Diseño

FCStone Grain Recap
January 28, 2015
CORN:
Values pressed lower into the close, breaking through the 100 day moving average as the trade
imagines higher production figures that could be forwarded by the upcoming Ag Forum
conference in late February. Ethanol production was down slightly this week to 978 tbd but
remains at an elevated production level. Demand has declined and stocks are now at near two
year highs.
Weekly gasoline usage is relatively stagnant which led to the recent building of ethanol stocks.
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FCStone Grain Recap
January 28, 2015
Eyeballs will be focused on acres and yield from the upcoming Ag Forum starting Feb 19th. The
USDA is allowed to borrow and shoehorn lots of different ideas into this get together with little
accountability. This can give them freedom to forward some good ideas and bad. The USDA has
been somewhat slavish to previous year’s experiences, when it comes to estimating the coming
year’s yield for corn, up until about 5 years ago. The deviation could be associated with the
USDA developing a weather and planting progress model to project yield. The USDA also leans
optimistic except when previous yields were exceptional deviations. Borrowing cues from this
model the USDA will likely throw a 168.2 to 171 corn yield as their estimate for the forum. See
below scatter chart.
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FCStone Grain Recap
January 28, 2015
Expanding on that idea I have included a table that shows the effect of the variation of yield on
carryout. I have tossed in a 2013 yield and a 2004 style yields for good measure. I am assuming
a 90 mln acre number for the planted for all purposes as I believe the government will lean
towards less acres loss than was previously assumed.
US Corn:
90
82.5
163
Trend
90
82.5
169.5
90
82.5
174
(2004 style dev.)
90
82.5
186
Production
Available
2100
25
13043
15168
2100
25
13448
15573
2100
25
13984
16109
2100
25
14355
16480
2100
26
15345
17471
Total
13725
13725
13725
13725
13725
1443
1848
2384
2755
3746
Plant
Harvest
Yield
Carryin
Carryout
15-16
90
82.5
158.1
Funds sold 11,000 contracts of corn today.
SOYBEANS:
Values finishing modestly lower dragged down mostly by heavy selling in corn, wheat and bean
oil. Bean oil weighed down by bigger palm oil production projections and an allowance by the
EPA to have imported biodiesel from Argentina participate in the RIN program and thus the RFS
program. The National Biodiesel Board is at odds with the EPA over this decision as they claim
there will be a real lack of oversight in the program and could undercut biodiesel production in the
US. The EPA assures there will be oversight and imports will remain approximately the size they
are now. Funds sold 8000 contracts of bean oil today.
One waterway in Southeastern Brazil is now to remain closed during the grain shipping season as
January rains were not able to recharge the Tiete-Parana waterway adequately. The waterway
usually moves 2.5 mmt of soy, corn and soy products for export. That quantity will be needed to
be shipped by truck to the Port of Santos. Brazil’s ship line up for soybeans has now increased to
2 mmt.
China is likely to cut its growth target to 7%, down from the historical 8% the government likes to
forecast. The economy came up short last year with 7.4% which could be linked with some of the
declines in meat demand and feed demand domestically. China has been focusing on building
various reserves for food with some announcements about nearly doubling their corn reserves.
Turning to the US market the focus on more bean acres and less corn acres has reversed a bit
and now we must focus on what the Ag Forum will put forward as the working S&D tables until the
new crop ones are released in May. I am assuming an 85.5 mln acre planted figure to allow for
corn to gain back some of the acres previously “lost”. In the below table I have arranged a
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FCStone Grain Recap
January 28, 2015
reasonable range of yields that could be a result of weather this year with the trend yield the most
likely the one the Ag Forum will forecast in its upcoming data release. I tossed in a 1994
deviation from trend to show what good crop weather could do to yield as it relates to trend.
US Soybeans 15-16
Planted
Harvested
Yield
15-16
85.5
84.7
40
Trend
(1994 style dev)
85.5 85.5 85.5
85.5
84.7 84.7 84.7
84.7
43
45
47.8
50
Carryin
Production
Available
350
3388
3753
350 350 351
3642 3812 4049
4007 4177 4415
352
4235
4602
Total Use
3850
3850 3850 3850
3850
Carryout
(Rationing) 157
327
565
752
WHEAT:
The market can be summed in one word…weak. Weak world demand, weak exporter’s
currencies, and weaker competing exchanges. The Matif was down 22 cents while the CME was
down 14 cents/bu. The Dollar index rose a strong 57 points today. The US remains
uncompetitive into Egypt. The EU vegetative index is significantly improved, in the wheat areas,
compared to last year. The Chicago March contract is 25 cents away from contract lows. Funds
sold 8000 contracts of Chicago wheat today.
ECBOT
HIGH
LOW
CLOSE
CHANGE
Mar Corn
May Corn
3.815
3.8975
3.73
3.8125
3.7325
3.815
-8
- 8 1/4
Mar Beans
May Beans
9.7775
8.845
9.6625
9.7375
9.7025
9.7725
- 3 1/2
-4
Mar wheat
5.205
5.03
5.5025
- 13 3/4
Regards
Bevan Everett
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