Current Market Conditions

For the second straight month, federal forecasters have cut their outlook for the size of the U.S. corn crop. The focus turns to impending shortages in supply by next summer. One side of the debate argues that historically high prices will curb demand preventing a shortage while most private analysts counter that a reduction in consumption is unlikely making a shortage almost a certainty. China is unlikely to allow their strategic reserves to reach precarious levels while federal mandated ethanol production in the U.S. will continue to consume large quantities of the corn supplies on hand. A certainty is that demand for another large corn crop will remain strong as will farm rents and land prices.

Corn Futures Up on World Demand and Short Supply

Corn Harvest to Fall Short of Forecast Further Shrinking Inventories - Even though the U.S. continues to produce crops that are massive by historical standards, farmers can't keep up with world demand. U.S. forecasters predict that the nation's crop will fall short of demand by 246 million bushels in the next year. That will shrink inventories used to help prevent supply shortages. China has struggled with this issue as government officials weigh the need to increase strategic reserves against inflationary pressures resulting from withholding corn from the marketplace. This season's poor harvest in the Midwest will cause ripples through the economy and world market. Corn futures are up 16% so far this year. The significance of agriculture on the overall economy has put many Wall Street analysts and investors out on the farm meeting with producers and evaluating crops in an effort to understand and get ahead of the USDA crop reports. The effect on Mississippi farmland will be a continued climb in values coupled with an extremely short supply of available farmland investments.

Rapid Growth in Farmland Values

Productive cropland values have grown at an average rate of between 20% to 70% during the past five years. The growth is not driven by the presence of short-term speculative buyers but rather by informed long-term agricultural investors. Today, farmers make up a greater portion of land transactions than has been the case in the last twenty-five to thirty years. Farmers’ debt-to-equity ratios are at their lowest levels since at least 1960, when the USDA started tracking farmer balance sheets. The increasing presence of knowledgeable agricultural investors combined with a tight supply of land available for sale is significant evidence of the stability in the farmland market.

China Battling Inflationary Pressure by Purchasing Corn

China's policy places a high premium on its grain security. State stockpiles are important. China purchased 1 million metric tons of U.S. corn in March to replenish dwindling state reserves. However, China still has an extremely low stockpile of corn relative to the use. There has been a soaring demand for pork by Chinese consumers and corn is a major feedmeal ingredient for the pork industry. Wholesale pork prices reached a record in China on June 17 and in response Bejing released corn from its stockpiles to hold down inflationary pressure.There is strong speculation that Chinese companies are again in the market for large corn purchases in the range of another 1 million tons.

China May Import More Corn and Soybeans as Reserves Fall Short

Investment bank JP Morgan reports that the demand for feedgrains is rising as more people in China are switching to a protein-rich diet. China's need for grain has increased due to growing demand for meat, fattened with corn and soybeans, from its middle class. As a result China last year made its first significant purchase of U.S. corn since 1995, buying around 1.5 million tons. Corn imports could hit 5 million tons this year. Though corn has the better potential for price growth, Chinese soybean import demand could rise 20% in 2011. Last year, China imported 55 million tons of soybeans, compared with just about 5 million in 1999.

Higher oil prices will make corn more expensive due to its use in the production of ethanol. Couple this with the revelation that Chinese reserves are 10 million to 12 million tons less than previously thought. The potential for increased demand from China threatens to tighten global corn supplies which have already dropped to a precariously low level. Corn futures have reached an all-time high in an attempt to curb demand from limited stockpiles ahead of this fall's harvest.

Record World Grain Demand in 2011 - 12

World grain markets are expected to remain bullish in the upcoming season as even a near-record world crop will be unable to meet a new high in demand according to the president of U.S. grains analyst AgResource. Global food prices also hit record highs in February according to the United Nations' food body.

High Corn Prices Here to Stay

U.S. farmers expect to plant 92.2 million acres of corn in 2011, the second most since 1944. Yet corn futures hit an all-time high of $7.73 1/4 a bushel the week of April 4, 2011, more than double a year ago, driven by soaring demand for corn for use as animal feed and in ethanol production. Normally higher corn plantings in the U.S. - the world's largest corn producer - would dampen prices. And higher corn prices would dampen demand. But so far there is little evidence of either. Prices will have to rise much higher before demand starts to fall.

Favorable Summer Forecast for U.S. Corn and Soybeans

U.S. corn and soybean farmers should enjoy favorable growing weather this summer, meteorologists said in long-range forecasts. Temperatures won't be as hot as they were last year in the heart of the U.S. corn and soybean belt. The summer forecast also indicates favorable precipitation. With U.S. corn supplies nearing their lowest level on record, analysts say U.S. farmers must produce strong crops both this year and next to replenish supplies. Based on the forecast, corn yields will likely be higher this season. Total soybean production would be down this year due to reduced acreage, not weaker yields.


Farmers Plant Corn Faster Than Normal In Southern US

Corn planting is ahead of schedule in the southern U.S., according to state crop progress reports.
Warm, dry weather in Arkansas, Mississippi and Texas has allowed growers to accelerate planting after some areas saw temporary delays due to rain. Weekly reports issued by the U.S. Department of Agriculture confirmed growers had made significant advances in the past week.

"Excellent weather conditions allowed producers to progress with field activities," the National Agricultural Statistics Service office in Louisiana said.

The south makes up only about 6% of U.S. corn production, yet grain consumers are closely watching early plantings there in the face of low supplies, which are projected to reach a 15-year low this year. Corn futures recently reached 32-month highs and grain users remain concerned world supplies won't keep pace with strong demand.

Farmers in the southern U.S. are busy planting corn, but aren't expected to significantly increase the number of acres devoted to the grain. Strong prices for cotton are making it a more attractive crop.

"The price is so good on cotton right now that some of that corn acreage will likely be shifted" to the fiber, said Brent Bean, professor and extension agronomist at Texas A&M University.

The USDA last month projected cotton plantings nationwide would expand 18.2% from last year to 13 million acres and corn plantings would jump 4.3% to 92 million acres. The government will update its planting forecasts Thursday.

Favorable weather in southern states contrasts with wet weather in the northern Plains and Midwest that has raised worries about planting delays that could reduce corn output. Farmers in the Midwest, where the bulk of the country's corn is grown, will begin sowing early next month.

Planting was 46% complete in Mississippi as of Sunday, up from 5% a week earlier and above the average of 22%, according to government data. In Arkansas, planting was one percentage point ahead of normal at 28% complete. The crop in Texas was 50% planted, up from 43% a week earlier and above the average of 48%.

Growers are mostly finished planting in southern Texas. In the north, where the bulk of the state's corn is produced, farmers will avoid problems associated with a severe drought because most of the corn is irrigated, Bean said.

Rains in January aided planting in southern Texas, but the crop will need more moisture in the next month, said Charles Ring, a corn grower and member of the Texas Corn Producers Board. The state accounted for about 2.4% of national corn production in 2010 and is the largest corn producer in the south.

With the ethanol industry's impact on corn production, U.S. farmers are poised to increase plantings to take advantage of corn prices that recently topped two-and-a-half year highs on strong demand and tight supplies. Government mandate requires 12.6 billion gallons of ethanol to be blended into the nation's fuel supply this year. Ethanol producers are expected to consume roughly 5 billion bushels of corn this year, more than a third of total production, according to a USDA forecast.



China Demand To Push Global Soybean Trade To Record High?

Demand from China and the European Union is likely to boost global soybean trade this year by 5.4% to a record high of 97.6 million metric tons, the International Grains Council said.

The IGC raised its forecast for global soybean trade in the year ending Sept. 30 by 200,000 tons in a monthly report for March.

It forecast China's soybean imports to rise 6% to 56 million tons, or nearly three fifths of global trade, boosted by rapid expansion in the vegetable oil and feed meal sectors.

It said E.U. soybean imports will likely rise 17% to 13.5 million tons, due to tighter availability and higher prices of other alternatives such as rapeseed.

The IGC also raised its estimate for 2010-11 global soybean production to 259.1 million tons due to improved prospects in South America. Brazil's soybean harvest may hit a record high of 70.3 million tons, it said.

Higher exports from Brazil and Paraguay will more than offset a marginal fall in exports from Argentina, it said. It forecast Brazil's soybean exports to rise 12% to 32 million tons.

It said global soymeal trade will likely rise 7% to 58.3 million tons, boosted by strong import demand in both Asia and the E.U.

It forecast Soymeal imports by the E.U. to rise 8.6% to 23.9 million tons, and raised its projections for Brazil's soymeal exports by 3% to 13.2 million tons.

It forecast global rapeseed trade to decline 10% to a three-year low of 10 million tons, due to weaker demand in North America and Asia, as prices are high compared with soybeans.



USDA Sees U.S. Share Of Top Wheat Buyer Egypt's Imports Rising

The U.S. share of imports by top wheat buyer Egypt has jumped to 36%, or 3.5 million metric tons, this season in the wake of Russia's grain export ban, the U.S. Department of Agriculture said. In a new report published, the USDA's Cairo attache said the U.S. was ranked behind only France in supplying the Arab world's most populous nation, and its share of the 10 million-ton market is expected to rise next season.