Grains Surge in March Created by rrummel on 4/1/2014 4:33:30 PM
Courtesy: Colvin and Company
Corn, soybean, and wheat
prices all increased throughout March due to uncertainty in Ukraine and strong
fundamentals. Tension in Ukraine, the fifth largest wheat producer and third
largest corn exporter in the world, greatly affected wheat and corn prices this
month. Farmers in Ukraine are reportedly hoarding grain as a hedge against
potential currency issues moving forward. Additionally, Crimea contains five
major ports which could cause export issues in the future. Up to 20% of
Ukrainian farmland may go unplanted this year due to lack of farmer funding,
according to the Ukrainian Community Advisory Board.
Within the U.S., logistic
problems and delays have been occurring on railroads due to the significant
rail car traffic and shortage of rail cars created by domestic oil production.
All railroad users are feeling the effects. Ethanol plants within the Corn Belt
have been reportedly bidding over $5,000 per rail car, if even able to secure
the cars for use. Additionally, temperatures have remained below average,
limiting the Mississippi River thaw and usage.
May corn prices surged by
8.4% throughout March and closed at $5.02 per bushel, its third consecutive
monthly gain. Very strong export sales thus far in the marketing year led USDA
to decrease ending stocks in the March WASDE Report by 25 million bushels to
1.456 billion bushels. On March 31st, the USDA estimated that 91.7 million
acres of corn will be planted for the 2014 crop year in the U.S., a decrease of
4% year-over-year due to strong profits by planting soybeans this year. USDA
also estimated 7.01 billion bushels of corn were stored in all positions as of
March 1, 2014, a 30% increase from 12 months prior due to the record 2013
The May soybean contract
increased again this month by 3.5% and closed at a record high $14.64. The USDA
decreased ending soybean stocks by 5 million bushels in the March WASDE Report,
due to increased exports. Currently, ending stocks are now estimated at 145
million bushels. Farmers are predicted to plant 81.5 million acres of soybeans
this year, up 6% from 2013, due to the favorable price ratio to corn, according
to the USDA's Prospective Plantings Report. Additionally, USDA stated soybeans
stored in all positions as of March 1, 2014 at 992 million bushels, down 1%
from 12 months prior.
May wheat prices significantly
increased this month by 15.8%, closing at $6.97 per bushel, primarily driven by
the uncertainty surrounding Ukraine. In early March, USDA did not make any
changes to the balance sheet of wheat in the monthly WASDE Report. USDA
estimated that U.S. farmers will plant 55.8 million acres of wheat in 2014,
down 400,000 acres from last year. Wheat stored in all positions was estimated
15% lower as of March 1, 2014 by USDA to 1.06 billion bushels.
South American Crop
Estimated soybean production
in both Argentina and Brazil were each increased this month by 500,000 tons to
53.5 mmt and 84.5 mmt respectively, due to improving soybean conditions,
according to Oil World. Mixed conditions of very dry and very wet throughout
localized regions have kept recent estimates below January 2014 estimates.
Brazilian corn has been
hampered by dry weather conditions in the south and southeastern regions of
Brazil, while heavy rains have impaired the second-crop corn in Mato Grosso.
The Argentinean corn harvest is 7% behind where it was last year, due to
torrential rains. Despite the harvesting difficulties in Argentina,
expectations are high for the corn crop in 2014, due to favorable weather
Short delays are still
occurring throughout Brazil and Argentina due to the lack of adequate
infrastructure. Argentina's Rosario Port Authority estimates that delays will
persist for several weeks due to a vessel running aground early this month.
The Creighton University
farmland price index decreased to 40.9 from 41.7 this month. Uncertainty over
when the Federal Reserve will increase interest rates has attributed to the
decline of the farmland index, which declined for the fourth month in a row.
Equipment sales have declined to their lowest levels since May 2009, due to the
decline in farmer income in 2013. Professor Goss stated, “Slight upturns in
agriculture commodity prices over the past several months have yet to boost the
Rural Mainstreet Economy. We will need to see additional increases in farm
commodity prices to push the agriculture based economy back into healthy growth
territory such as was experienced in 2012 and early 2013.”
Throughout spring, we have
been consistently sourcing strong buying opportunities in farmland. Sellers who
are trying to sell their land prior to planting are now in a rush to do so. The
unofficial buying season of farmland will end as soon as farmers are able to
turn their attention to planting from the farmland market.
Planting season is nearing and farmers have been busy
preparing by making final decisions on the crop to be planted and types of
inputs to use. We will closely monitor the weather as southern states will
starting turning planter wheels within weeks, but any significant precipitation
that occurs in late April will immediately delay planting. We also look forward
to the continued thaw of the riverways to help improve domestic