farmgate: It's A New Day, Do You Know Where Your Markets Are?
South American soybeans. Chinese corn imports and exports. Australian wheat production. Korean beef demand. All are headline issues that move the US commodity market and directly affect the prices that farmers receive. Remember the public service announcement that asked “It’s ten o’clock; do you know where your children are?” If you are marketing commodities, you should know the international dynamics involved.
Along with the November Crop Report from USDA, the World Agricultural Outlook Board released its World Agricultural Supply and Demand Estimates for the month. Included in the lengthy report were global assessments on grains, oilseeds, and livestock, as they would impact the US market.
Wheat: Domestically, USDA kept most supply and demand numbers static, but did forecast 5 million more bushels imported from Canada. The season average price was refined a bit and forecast at $5.90 to $6.30 per bushel for the marketing year. Globally, production is expected to increase with the help of better crops in Argentina and China, but Australian production was cut slightly because of continuing drought. World consumption is expected to increase as the result of higher production, despite low supplies and high prices in other parts of the world. The world stocks are being rebuilt and USDA says they are 2.8 million tons larger than in October. However they are still the lowest in 30 years.
Coarse grains: Domestically, corn feed use during the year and carryout next August were lowered, with a resulting rise in the season average price to $3.20 to $3.80 per bushel. Sorghum production was raised, but higher export levels more than offset it, with a resulting decline in ending stocks. The season average price will be $3.00 to $3.60. Barley exports were raised in conjunction with higher global demand, while domestic feed use of barley was reduced. The average barley price will be $3.55 to $4.15. Globally, coarse grain supplies were estimated slightly higher, as lower corn production and higher production of other grains balance out. Chinese production was estimated 2.0 million tons more on more acreage. More corn was also found in Europe and the Ukraine. Subsequently, there will be increased international trade in coarse grains with the biggest increases going to Europe, Canada, and Japan. World ending stocks should remain unchanged for coarse grains.
Oilseeds: Domestically, soybean ending stocks are estimated at only 210 million bushels next August. Current year production estimates have declined because of lower yields. However, total oilseed production is up because of larger crops of peanuts and cottonseeds. The season average price for soybeans is $8.50 to $9.50, with soybean meal prices estimated $15 per ton more than the October estimate. Soybean oil prices have recently exceeded 41.5 cents per pound, a 15% climb in the past month. Globally, oilseed production is down because of foreign production declines for rapeseed and cottonseed, despite more sunflower seed production. In the palm world, global production is up as a result of more crops in Indonesia. Global ending stocks are estimated to be lower than October, resulting from lower soybean stocks in Brazil and China. Global vegetable oil stocks are up from increased palm oil in Indonesia.
Livestock, poultry, and dairy: Domestically, mean production will be up in 2007 from higher slaughter rates in cattle and hogs. Broiler production is also up and hatchery numbers are also increasing. Poultry is up so much, it offset lower beef production. Pork production will be off slightly because of higher feed costs. 2008 exports will be lower resulting from a suspension of trade with Korea until new protocols can be agreed upon. The weaker dollar and lower prices will help pork exports increase. Prices for cattle are weakening due to a larger supply, which parallels the pork market. Milk production is expected to be down in 2008, despite slowly growing production. Imports of milk products will be down due to the weak dollar and tight supplies elsewhere. The all milk price that will average out between $18.95 and $19.05 in 2007 should be in the $17.70 to $18.60 range for 2008.
Summary:
While US commodity production and supplies are generally known around the Cornbelt, frequently international supply and demand is not know, but can have a significant impact on the market value of US commodities. Wheat is still at a 30 year low in global supplies, but stocks are building slowly. Coarse grains, such as corn and other feed grains, are seeing increased demand internationally because of the shortage of feedwheat. While ending stocks will remain unchanged, average prices are climbing. Oilseed production will be down in the US, with tight ending stocks, but internationally total oilseed production will be up with the help of Indonesian palm oil. In livestock trade, meat supplies are increasing and prices are decreasing domestically.
Posted by Stu Ellis on November 12, 2007 12:33 AM to farmgate