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News Flash: April 17, 2014

SOYBEAN

Louisiana soybean acreage expected to increase in 2014

In a trend mirroring much of the Southern United States, Louisiana farmers are expected to plant more soybeans than they did last year, according to LSU AgCenter soybean specialist Ronnie Levy. He expects growers to plant 1.3 million acres as compared to 1.1 million acres in 2013. “We’ve been on a steady climb the past 10 years in terms of both acreage and yields for soybeans,” Levy said. “Because of unfavorable, wet planting conditions for corn, the increase in acres for soybeans will come primarily from those corn acres.” Seedquest

Soybeans at 10-Month High as Record Crush Erodes U.S. Supplies

Soybeans extended their climb to the highest level in more than 10 months after a report showed record demand from U.S. mills, boosting concern that supplies from the world’s second-biggest exporter would be reduced. Soybeans for July delivery rose as much as 0.8 percent to $15.2025 a bushel on the Chicago Board of Trade, the highest price for a most-active contract since June 6. Processors crushed 153.84 million bushels in March, up 12 percent from a year earlier and the most for the month since 1998. Domestic stockpiles at the end of August will be 135 million bushels, less than the 145 million bushels forecast in March and below 141 million last year, the U.S. Department of Agriculture said last week. Soybean prices are “supported by worsening tightness in U.S. soybean supplies,” Luke Mathews, a commodity Strategist at Commonwealth Bank of Australia, reported. Slightly better-than-expected Chinese economic data has also supported “improved sentiment within the oilseed market and helped traders turn a blind eye to recent reports of Chinese soybean cancellations” and defaults, he said. Importers in China, the biggest buyer, may default on as much as 2 million metric tons of shipments, according to the U.S. Soybean Export Council’s Beijing office. The country’s gross domestic product rose 7.4 percent in the first quarter, government data showed yesterday. The median estimate of analysts in a Bloomberg survey was 7.3 percent. AgWeb

 

CORN

USA – Corn consumption continues to exceed projections

The USDA’s World Agricultural Supply and Demand Estimates Report (WADSE) released on April 9 projected corn stocks at the end of the current marketing year at 1.331 billion bushels. The projection of year-ending stocks has declined for five consecutive months and is now 556 million bushels smaller than the November 2013 projection. Compared to consumption projections made in November, current projections are 100 million bushels larger for corn used for ethanol production, 350 million bushels larger for exports, and 100 million bushels larger for feed and residual use. According to a University of Illinois agricultural economist, there have been minor changes in the estimate of stocks at the beginning of the marketing year, the projection of imports, and the projection of other domestic consumption. Seedquest

Canada’s Climate Warms to Corn as Grain Belt Shifts North

Corn is the most common grain in the U.S., with its production historically concentrated in a Midwestern region. This has not been possible in the fertile farmland of Canada’s breadbasket. That is changing as a warming climate, along with the development of faster-maturing seed varieties, turns the table on food cultivation. The Corn Belt is being pushed north. Growing seasons on the Canadian prairie have lengthened about two weeks in the past half-century. The mean annual temperature is likely to climb by as much as 3 degrees Celsius (5 degrees Fahrenheit) in the region by 2050, according to Canadian researchers. Farmers sowed a record 405,000 acres of corn in Manitoba, Saskatchewan and Alberta last year, double the amount two years earlier and almost eight times what it was 20 years ago. That compares with an estimated 95.4 million acres sown in the U.S. last year. Bloomberg

Wheat Rises 3% as Ukraine Tensions Threaten Exports, Production

Corn rose on the tensions in Ukraine, and continued wet weather in the U.S. keeps farmers from completing field work in Iowa and Illinois, the biggest producers of the grain. As much as 6 inches of rain fell in Iowa on Sunday, according to the National Weather Service, delaying preparation for planting. As much as six times the normal amounts of rain has fallen in the past two weeks in three bands of stormy weather that range from Iowa to Michigan, Missouri to Ohio, and Texas to Florida. Corn futures for May delivery gained 4 3/4 cents, or 1%, to $5.03 1/4 a bushel in Chicago trading. Soybeans rose, following corn higher, as demand for U.S. supplies remain strong. The Wall Street Journal

PALM

Palm Oil Crop at Risk Across Southeast Asia as El Nino Looms

Palm oil production in Southeast Asia is at increasing risk from the probable onset of an El Nino later this year. Plantations have already been hit this year by dry conditions. Due to both of these trends, prices have advanced. There could be a drop-off in rains if the weather event strengthens quickly, potentially affecting output that may have been curbed by the severe dry spell from mid-January to mid-March, according to Commodity Weather Group LLC. The events, which affect weather worldwide, typically curb rains in Indonesia and Malaysia, the world’s two largest palm oil producers. An El Nino may also spur fires and increase haze across Southeast Asia. During the first-quarter dry spell, which drove parts of Malaysia into drought, futures on the Bursa Malaysia Derivatives rallied to 2,916 ringgit ($897) a metric ton in March, the highest price since September 2012. The benchmark rose 1.1 percent to 2,665 ringgit today, the highest price at close for futures since March 26. The chance of an El Nino during the southern hemisphere winter is now more than 70 percent, Australia’s Bureau of Meteorology said on April 8, citing weather models that showed a warming of the tropical Pacific. The U.S. Climate Prediction Center boosted the odds to 65 percent from 52 percent. Dorab Mistry, director at Godrej International Ltd., warned last month that the onset of an El Nino would spur higher prices. There is increasing confirmation the event will develop from June to July, he said. Output in Malaysia may total 19.2 million tons in 2013-2014 from 19.3 million a year earlier, according to the USDA, which forecast an 8.8 percent rise in Indonesian production to 31 million tons. While the oil is produced year-round, output is seasonal and varies from month to month. Stockpiles in Malaysia increased 1.9 percent to 1.69 million tons in March from February as output expanded, according to the country’s palm oil board. The reserves are 22 percent smaller than the same month a year earlier. Bloomberg

Palm Oil Imports by India Tumble for Third

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Month on Price Rally

Palm oil imports by India, the world’s biggest buyer, slumped for a third consecutive month in March as the highest prices in 18 months reduced appeal of the tropical oil. Purchases of crude and refined palm oils declined 23% to 537,077 metric tons from a year earlier. Total imports, including for industrial use, retreated 6 percent to 835,424 tons last month. Futures in Kuala Lumpur jumped to the highest since September 2012 last month on concern that dry weather in Malaysia and Indonesia, the top producers, would cut output later this year. Declining Indian imports may expand stockpiles in Malaysia, which unexpectedly climbed last month as output increased and exports tumbled. Palm oil’s discount to soybean oil narrowed to an average $78.68 a ton this year from an average of $243.97 in 2013, according to Bloomberg data. Futures traded 1.1 percent higher at 2,665 ringgit a ton in Kuala Lumpur today on Tuesday. Cooking oil stockpiles at ports and scheduled shipments slid to 1.20 million tons on April 1 from 1.25 million tons a month earlier, data showed. India’s total cooking oil imports dropped 6 percent to 4.33 million tons in the five months ended March. India imports more than 50 percent of its cooking oil demand, shipping palm from Indonesia and Malaysia, and soybean oil from the U.S., Brazil and Argentina. Bloomberg

CANOLA

Canola Is Just Starting to Cook

Canola futures have rebounded from 3½-year lows, and increasing demand is likely to push prices even higher. A railway bottleneck in Canada pushed prices of the oilseed in February to the lowest since June 2010, because buyers turned to other markets and bought alternative oilseeds like soy and palm oil. But last month, the Canadian government introduced tough railway rules that have helped canola start to flow more freely, traders and growers say, which is spooling up demand. “Logistical issues in Canada have eased considerably, and this has resulted in export customers returning,” says Sterling Smith, a futures specialist at Citigroup in Chicago. That’s helped front-month prices gain 14% from the Feb. 13 low. Canola is also getting a boost from higher prices for soybeans, which have many of the same uses. With soybean prices around 10-month highs on the Chicago Board of Trade, canola is a less-expensive alternative now that supplies are moving again. The front-month canola futures contract for May delivery ended on Friday at 460.50 Canadian dollars (US$420.16) a metric ton on the ICE Futures Canada exchange, up 1.4% on the week. Soybeans for May traded at US$14.63 a bushel on Friday, or US$537.56 a metric ton. Global demand for canola and other vegetable oils is seen nearly doubling to 250 million tons over the next decade, up from an expected 150 million tons

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in 2015, according to the Canola Council of Canada. We believe the demand is there for substantially more than we’re producing,” says Terry Youzwa, a third-generation farmer in Saskatchewan and chairman of the Canola Council of Canada. “Canola is positioned very price-competitively with the other crops we grow.” Still, investors should be aware that expectations for large soybean crops in South America and big plantings in the U.S. could weigh on canola prices, since the oilseeds can be substituted for one another to some degree. Plus, Canada still has stockpiles from 2013’s record crop. But strong demand should keep the market well supported, traders and analysts say. Weather is also an important factor, considering that flooding, and wind have damaged previous crops. Barrons