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News Flash: September 4, 2014

INDUSTRY

Big Seed Makers Unlikely to Cut Prices Despite Farm Slump

Major seed companies don’t plan to cut prices for the next growing season despite sliding corn and soybean prices, which are expected to negatively impact U.S. farmers’ incomes. Monsanto and DuPont aim to raise prices for their newest and best-performing varieties of seeds next year, though in some cases the increases may be smaller than in past years, senior executives said. Farmers in the U.S. and elsewhere are confronting a second-straight year of declining crop prices thanks to anticipated back-to-back bumper crops in 2013 and 2014 that have bolstered stockpiles of corn and oilseeds. Corn futures have dropped 14% this year and are trading near four-year lows. Soybean futures have fallen 18% and are also near four-year lows.Wall Street Journal

Canada set to import more US produce

Canada looks likely to import far more US fruit and veg during the coming year, pushing the value of American exports to US$21.7 billion. Overall, the value of fresh fruit, vegetables and nuts exported by the US in 2015 could outstrip that of grain and feed for first time in the country’s history, according to new information published by the USDA. The sector appears set to buck the prevailing trend as far US agricultural exports are concerned, with lower prices for corn and soybeans expected to push down the value of the country’s exports to US$144.5 billion, down US$8 billion or 5.25 % on the previous year.Fruitnet

U.S. Grain Futures Tumble on Upbeat Outlook for Crops

U.S. grain and soybean futures closed sharply lower on Wednesday—with corn sinking to the lowest level in more than four years—after government and private-sector reports reinforced expectations for massive harvests this year. Corn futures for September delivery fell 4.1%, the biggest decline on a percentage basis since June 30, pressured by reports from Allendale Inc. and Lanworth estimating high yields that may translate to larger U.S. grain stockpiles, analysts said. September corn dropped 14½ cents to $3.41¼ a bushel on the Chicago Board of Trade, marking the lowest closing price since 2010. December corn futures, the most-active contract by volume, dropped 11¾ cents, or 3.2%, to $3.52 a bushel. Corn prices also were weighed down by a crop-progress report by the U.S. Agriculture Department on Tuesday afternoon that showed 74% of U.S. corn was in good or excellent condition as of Sunday, up from 73% seven days earlier and only 59% a year ago. Soybean futures also declined Wednesday as crop-yield forecasts soothed concerns over weather-related threats to some U.S. soybean fields. Fund managers speculating on soybean prices have shied away from bidding contracts higher following the USDA report on crop conditions and the private estimates on yields released so far this week, according to Mike Zuzolo, president of Global Commodity Analytics & Consulting, based in Atchison, KS.”That completely defused the soybean potential buyer from coming into the market,” Mr. Zuzolo said.Soybeans for September delivery on the CBOT declined 16½ cents, or 1.5%, to close at $10.80¾ a bushel. Most-active November soybeans shed 12 cents, or 1.2%, to $10.20 a bushel. Wall Street Journal

Hefty Carryovers for Soybeans and Corn Likely in 2014/15

The first survey-based estimate of this year’s soybean crop shows record production potential. In August’s World Agricultural Supply & Demand Estimates report, USDA pegged the crop at 3.816 billion bushels. Since traders assume big crops get bigger, they anticipate the supply side of USDA’s balance sheet will grow even more before the end of the 2014/15 marketing year. That depends on how the crop finishes, since weather will determine how much or little late-season moisture soybeans get and how long the growing season lasts. Even if the crop finishes poorly and yields fall short of USDA’s estimated 45.4 bu. per acre, this year’s crop will break records with the surge in planted acreage. The market’s attention will soon shift to demand. Carryover for the new-crop marketing year is set to grow to 430 million bushels, more than three times estimated old-crop ending stocks. Looking beyond the 2014/15 marketing year, the market will continue to work to find a home for excess supplies. Lower prices encourage more usage, and that process has begun. November soybean futures declined about 20% in anticipation of the record crop. The market must wait to see how domestic and global end-users respond to the sharp price drop. A lofty increase in soybean usage is plugged into USDA’s new-crop balance sheet. Soybean usage in the 2014/15 marketing year is projected to be 3.541 billion bushels, a record. Soybean usage estimates from USDA have risen in three of the past five years from initial May projection to final estimate. Usage increases occurred under much higher prices. The exceptions happened in marketing years 2011/12 and 2012/13 as prices built to an all-time high in summer 2012. The sharp price rise undoubtedly influenced soybean usage. Prices already are sharply lower this year, and China is leading the world’s countries whose appetites for oilseeds are building. It’s easy to construct a scenario in which demand builds through the marketing year to cut into projected carryover. The problem the soybean market faces is that even if demand expands 100 million bushels, or even 200 million bushels, carryover will still rise sharply in 2014/15. Soybean usage could build through the marketing year in response to lower prices, and it still wouldn’t make enough of a dent in supplies to alter the fundamental outlook in the year ahead. Building the demand base remains important. The more excess soybeans the market can chew through in 2014/15, the quicker carryover will get back to what the market considers comfortable. The sooner that happens, the faster soybean futures can start price recovery.  Record-large corn production also is forecast this year. The estimated year-over-year supply increase is not as dramatic as with soybeans, but USDA still projects corn ending stocks to swell to more than 1.8 billion bushels at the end of the 2014/15 marketing year. The market has had ending stocks of 1.1 billion bushels or fewer since 2010/11, so corn supplies in the year ahead are comfortable. The corn market reacted to the projected increase in supplies with sharply lower prices, spurring increased corn usage. The process of rebuilding corn demand with lower prices started early in marketing year 2013/14. Surprisingly, USDA doesn’t have year-over-year growth in corn usage plugged into its 2014/15 balance sheet, even though its forecast calls for the average on-farm cash corn price to drop 55 cents from the current marketing year. Lower prices and a recharged appetite for U.S. corn suggest there’s room for demand growth. The biggest challenges for U.S. corn producers in the year ahead will be to expand corn-for-ethanol usage and to compete with increased exports of greater feed wheat supplies out of Europe and the Black Sea region. AgWeb

PALM

Malaysia Scraps Palm Oil Export Tax for Two Months

Malaysia, the world’s second largest palm oil producer, scrapped an export tax on the crude variety for two months to boost shipments and reverse a decline in prices. Shipments of crude palm oil in September and October will not attract a levy, the Ministry of Plantation Industries and Commodities said in a statement. The government earlier set the tax at 4.5 % for September. The tariff exemption will increase exports by 600,000 metric tons and help contain stockpiles at 1.6 million tons by year-end, it said. Palm tumbled into a bear market in July on swelling global supplies of edible oils, including a record soybean harvest in the U.S. Prices risk tumbling further to approach the cost of production, according to Dorab Mistry, director at Godrej International Ltd. Futures on the Bursa Malaysia Derivatives in Kuala Lumpur plunged to 1,914 ringgit on September 2, the lowest level since March 2009, and closed at 2,030 ringgit today. In the absence of measures to stop the slide, prices would have further declined until the end of the year, the ministry said. “The tax incentive is the best instrument to promote the export of (crude palm oil) and reduce (crude palm oil) stocks in the country,” the ministry. Without the tax exemption stockpiles would have jumped to as high as 2.2 million tons by the year end, it said. Reserves advanced 1.5 % to 1.68 million tons in July from a month earlier, according to data from the Malaysian Palm Oil Board . Output rose 6.1 % to 1.67 million tons and exports fell 2.3 % to 1.45 million tons, board data showed. Malaysia cut taxes on exports in January 2013 to trim record stockpiles, replacing a tariff of about 23 % with a sliding scale from 4.5 % to 8.5 %. The tax rates rose as prices climbed from the 2,250 ringgit a ton base price. Indonesia reduced its export tax to 9 % for September, the lowest since November. Production in Malaysia may reach a record 19.7 million tons to 19.9 million tons this year, while Indonesia’s output may total an all-time high of 30.5 million tons or more this year, according to Mistry. Bloomberg

SUNFLOWER

EU Sunflower Production Outlook Raised by Oil World After Rain

The sunflower seed harvest in the European Union may be larger than previously expected after crops received ample rain amid mild weather, Oil World said. Production in the EU may total 8.55 million metric tons in the 2014-15 season that started in August, 300,000 tons more than previously estimated and the second-highest ever, after the record 8.9 million tons harvested a year earlier. Prospects have improved especially for crops in Hungary and Romania, it said and harvesting has already begun in certain areas. “The exceptionally high amounts of rainfall received in Europe in July and the first half of August, while impeding harvesting and deteriorating the quality of winter and early spring crops, resulted in near-ideal growing conditions for summer crops, boosting yield prospects,” Oil World stated. “A lack of crop-stressing heat in that period also promoted favorable development of EU corn and sunflowers. Some fields are now looking even better than at the same time last year when record yields were achieved.” EU sunflower seed crushing may total 7.33 million tons in 2014-15, smaller than last year’s record of 7.61 million tons. Exports will fall to 700,000 tons from 710,000 tons. Combined sunflower seed output in Ukraine and Russia, the two biggest growers, may be 20.7 million tons in 2014, below last year’s record of 21.05 million. Farmers in the two countries had harvested about 850,000 hectares (2.1 million acres) as of Aug. 28, ahead of last year’s pace. Processing in 2014-15 was pegged at 20 million tons, also near the all-time high set the prior year, according to the report. Increasing global demand for vegetable oils means that sunflower seed prices may be near a bottom, while bumper oilseed harvests worldwide signal that “upward potential is probably limited,” Oil World said. EU sunflower seed prices in Amsterdam were $400 a ton as of August 28, unchanged in the past two weeks, according to the report. Bloomberg