1. Art and Diseño

FCStone Grain Recap
January 27, 2015
CORN:
Values weaker but the market is still unwilling to commit to the downside. As we discussed in
yesterday’s wire, the trade is starting to embrace less acre shifting from corn to soybeans. The
CBO, which does its math in November and posts their budget numbers in January is assuming
the US will plant 89 mln acres and harvest 81.5. The CBO is assuming a below trend yield of
165.8 bu/acre and a carryout just short of 2 billion bushels. I have put together a table comparing
my working corn S&D against the CBO’s figures and one alternate scenario using lesser acres
and yield.
US Corn: 15-16
FCStone
90
82.5
Baseline
89
81.5
Alt
88
81.0
Yield
169.0
165.8
165
Carryin
Production
Available
2100
25
13943
16068
2048
25
13513
15586
1900
25
13365
15290
Total
13725
13610
13725
Carryout
2343
1976
1565
Plant
Harvest
The difference between scenario 1 and scenario 3 is the difference between December futures at
310 and 430 during harvest. Currently the CZ15 is trading a scenario 1 level of price that are
models would project during the spring time. The market doesn’t have to wait long until we get
our next indication of what the new crop supply and demand tables could be. The Ag Forum is
scheduled for Feb 19-20. In that conference there will be the first collaborative look at what the
WASDE and the USDA’s chief economist will posit for a possible US outcome for each major
crops without being official estimates. I have placed below a recent history of the CBO Baseline v
the Feb Outlook v Mar Intentions and the final figure.
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FCStone Grain Recap
January 27, 2015
Corn Acreage Estimates
Crop
2010
2011
2012
2013
2014
Baseline Feb Outlook
88
92
94
96
93.5
89
92
94
96.5
92
March 31'
Final
88.8
92.2
95.9
97.3
91.7
88.2
91.9
97.2
95.4
90.6
The weather forecasters are starting to take a stab at the Spring planting weather forecasts and
so far the initial weather models are predicting a drier than normal MAM time period in the main
corn belt and a wetter than normal period in the Delta and Southern Plains. A drier corn belt
during planting is correlated and causative of greater corn acres than initially intended. One other
item to watch is sorghum plantings. The spot premiums have been very strong versus corn that it
may increase sorghum plantings in areas that may have lost winter wheat plantings and the
farmer is looking for a dryland crop. I roughly estimate that the 4 states of Tx, Ok, Ks, and Ne
could accumulate 1 mln more sorghum acres than were planted last year. This would be in direct
competition to corn in the export and feeding markets. The attaché to Argentina now projects the
country to have a 22.5 mmt corn crop, .5 mmt above the USDA’s January estimate.
SOYBEANS:
Values closed low enough to nearly erase yesterday’s gains. Talk of a bigger South American
soy crop and bigger Malaysian palm oil crop weighed on the soy complex. China also cancelled
120 tmt of soybeans. More cancellations are expected as the calendar draws closer to the
Chinese New Year holiday. China has 5 mmt of soybeans still to ship and the shift towards
sourcing soybeans from SA has begun. In the spot market there is no clear advantage but post
holiday there seems to be an economic advantage to booking beans from SA. Private analysts
are now raising row crop production levels for Argentina particularly soybeans to 56 mmt which is
larger than the USDA’s last figure in the Jan S&D. Brazil is a little more mixed in its projections
with some private analysts reducing their soy production for the country down to 93 mmt which is
still 6.3 mmt over last year’s production level. The USDA is currently working with a 94 mmt level.
Goias seems to be a focus point with its dryness and the fact it produces 10% of Brazil’s
production.
The CBO released its baseline estimates for the Soy S&D which had the November S&D as its
main starting point. The CBO is working with a planted acreage figure of 86 mln with a harvested
of 85.1 mln and a yield of 45 bu/acre. This works out to be a 499 carryout for the CBO. I have
included a table below that compares the CBO’s table to my working S&D and also against an
alternate view of acres, and demand.
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FCStone Grain Recap
January 27, 2015
US Soybeans 15-16
FCStone Baseline Alt
85.5
86
88
84.7
85.1
87.3
Planted
Harvested
Yield
45
45
45
Carryin
Production
Available
350
3812
4177
394
3830
4239
340
3929
4284
Total Use
3800
3740
3795
Carryout
377
499
489
45 bu/acre seems to fit in so many ways so I kept that constant across all scenarios. The main
variables were carryin and acres. Depending on your assumption of the ability to complete the
export program on the books will color the way you determine the current carryout. In all
scenarios the carryout is robust. In scenario 1 the models would point to today’s SX15 fairly
priced for Fall, whereas the next two scenarios are more associated with 800 futures if realized.
The CBO is using an $8.19 average price for 2015 v $10.00 last year.
Below I have included a table to show the progression of new crop acreage estimates for the last
few years. The CBO has been off by 3.5 mln acres from the March Intentions.
Soybean Acreage Estimates
Crop
2010
2011
2012
2013
2014
Baseline
Feb Outlook
March 31'
Final
76.5
78
74
76
78
77
78
75
77.5
79.5
78
76.6
73.9
77.1
81.5
77.4
75
72.2
76.5
83.7
WHEAT:
A choppy session that spent the majority of its time on the plus side was beaten down just below
unchanged in the final minutes. The trade is raising its expectations for the Argentina crop with
the US attaché now estimating it at 22.5 mmt which is .5 above the USDA’s last Jan figure. The
trade chose to ignore most of the news coming out of the Black Sea region as well. Some of the
trade restrictions were rehashes of last week’s announcements and other were related to fighting
between the ProRussian forces and the Ukraine regular army but were not impeding trade in
wheat. Texas wheat conditions dropped 1 point but ratings this time of the year are poorly
correlated with production. The CBO produced its working numbers in the wheat tables yesterday
Page 3
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FCStone Grain Recap
January 27, 2015
after the close. The CBO is using a 55.5 mln acre planted figure with a 47 mln acre harvested
number with a 45.5 yield and a 751 carryout. I have placed my working table for wheat next to the
CBO’s numbers and one alternate scenario. The biggest takeaway I want to highlight in wheat is
not the yield variation, or the carryin variation but the variation of abandonment assumptions. The
abandonment levels of wheat is as big or bigger impact on the supply of wheat as the yield. In the
last 10 years the abandonment level has ranged from 19.5% to 11.9%. In the scenario 1 there is
an 18% assumption of abandonment and in the last scenario there is a 13.5% abandonment
assumed.
US Wheat 15-16
Planted
Harvested
FCStone Baseline Alt
55
55.5
55.5
45.1
47
48
Yield
45.4
45.5
47
Carryin
Imports
Production
Available
687
150
2048
2885
654
150
2139
2943
687
150
2256
3093
Total Use
2175
2192
2200
Carryout
710
751
893
ECBOT
HIGH
LOW
Mar Corn
May Corn
3.86
3.9425
3.80
3.8825
3.8125
3.8975
- 2 3/4
- 2 3/4
Mar Beans
May Beans
9.855
9.925
8.7225
9.79
9.7375
9.8125
- 9 3/4
-9
Mar wheat
5.2425
5.175
5.19
- 1 1/2
CLOSE
CHANGE
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