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Crop advisors: Sell now, take advantage of prices
By MICHELE F. MIHALJEVICH
Indiana Correspondent

FORT WAYNE, Ind. — Producers should take advantage of current corn and soybean prices, since the potential exists for lower prices as the year progresses, according to a grain market analyst with Central States Enterprises.

Factors such as this year’s crop size, weather in the United States and the crop in South America could impact prices, with the potential for about $2 less a bushel for corn, said Jon Cavanaugh, marketing director with Central States’ New Haven, Ind., office.
“You’ve got to lock in at least some of that (crop) at today’s levels,” he said. “If you lose $1 to $1.50 a bushel, that can put you into a negative situation.”

New-crop soybeans, which are currently about $12.30-$12.40 a bushel, could plummet to the sub-$10 range later in the year, Cavanaugh said. His advice is to “sell, sell, sell.”

Much of the United States is still in a drought, with some areas up to 18 inches behind normal precipitation amounts, he noted. “There’s no way to make all of that up this winter,” he said. “We’ll have to have ideal growing weather this coming summer, because we’ll probably have low soil moisture this spring.”

Projected planted acres for this year’s corn crop are about 99 million, while in 2012, U.S. farmers harvested 87.4 million acres. Because of the anticipated increase, farmers could have another year of below-normal yields and still build up corn stocks, he said.
Projected total corn usage fell for 2012-13 from the previous year, as did supply, according to the most recent numbers from the USDA. Estimated ending stocks for the marketing year, as of Dec. 1, dropped from 989 million bushels in the 2011-12 year to an expected 602 million for 2012-13, the USDA said.

South America is on course to produce a large corn crop, which is why U.S. corn exports are down, Cavanaugh said. According to the USDA, U.S. exports are projected to be 950 million bushels for 2012-13, down from the previous year’s 1.5 billion.

Corn has become so cheap to purchase from countries in South America that it has become less expensive for feed mills to transport corn from there rather than get it locally, said David Kohli, market analyst with Allendale, Inc.’s Fort Wayne branch.

Corn imports were 29 million bushels in 2011-12 and are projected at 100 million bushels in 2012-13, according to the USDA. Kohli is anticipating prices on old-crop corn to be $7.40-$7.60, with new-crop corn about $5.25. “It’s two markets,” he said. “It’s like apples and oranges.”

Cavanaugh and Kohli spoke Jan. 15, the first day of the Fort Wayne Farm Show. The USDA’s crop report, which was released Jan. 11, showed a 4 percent increase in harvested corn acreage from 2011 to 2012, and a 16 percent drop in yield, to 123.4 bushels an acre. Corn production was down nearly 13 percent, to 10.8 billion bushels.
Cavanaugh and Kohli cautioned that some numbers may change when USDA releases its March reports. For example, the Jan. 11 report showed feed usage up 12 percent from November, but an earlier-than-normal harvest last year because of dry weather may have influenced those numbers, Kohli said. “Because (livestock producers) were feeding the new crop earlier, that made the feed usage numbers appear to be up,” he said. “Feed usage is a big question. Overall, the numbers are still way below a year ago.”

A record amount of corn was harvested in the United States in August, Cavanaugh noted. “It’s hard to determine true stocks numbers in December,” he said. “There’s a lot of concern we may show the feed usage numbers are distorted. There’s a concern we could offset bullish numbers now with a bearish report in March.”
While there was a great deal of anticipation for the report before it was released, Cavanaugh admitted “it raises a lot of questions. There’s more confusion now than there was before it came out.”
For soybeans, rainfall at the right time in August rescued the crop in many areas of the Midwest, Kohli said. According to the USDA, the nation’s crop was down nearly 3 percent from 2011 to 2012, to 3.015 billion bushels.

Harvested acres were up 3.2 percent, while yields dropped from 41.9 bushels an acre in 2011 to 39.6 bushels last year.
Stocks as of Dec. 1 were 1.96 billion bushels, down 17 percent from a year ago. South America’s soybean crop has gotten off to a good start and weather there will affect prices U.S. farmers see for soybeans, Cavanaugh said.

“We’ll be transitioning from very tight supplies to plentiful supplies, depending on the weather,” he explained. “The next six weeks are critical for South American weather. If they come through (with a good crop), that will be a price damper, a hammer over the market.”
1/23/2013