Additional blasts of extremely arctic cold air have been persistent throughout the Corn Belt for much of January. The long-term forecast calls for the cold snap to remain through mid-February causing more problems for farmers working outside this winter. Local grain price basis was softening due to farmers selling their corn and soybeans preparing for spring input expenses, but the bitterly cold has curbed local selling which has led to localized price support. The extreme cold may be a problem for farmers in January, but the cold helps alleviate soil compaction and kill soil fungus and other bug eggs that cause yield loss throughout summer. Current frost levels are near 50" in southern Minnesota. Such a deep frost can delay the spring thaw and cause farmers major planting delays pending additional snow and rain.
Farmland values are reverting back to their historical averages of 8% to 10% appreciation after nine out of ten years of double digit appreciation, according to two reports produced by Farm Credit Services of America (FCS) this month. Farmland prices appreciated 16% annually over the past ten years, although they have taken a slight decline in the past 12 months. Uncertainty about the Farm Bill and weaker commodity prices led to the decline. The FCS benchmark value still increased 9% from 2012, despite the recent slowdown of farmland appreciation, suggesting a trend back to historical averages.
March corn prices increased this month by 2.8% and closed at $4.34 per bushel, its first monthly gain since August, due to stronger than expected export demand and high cash prices. Areas of the Corn Belt have been experiencing elevated cash prices due to the extreme cold which has pushed local basis higher because farmers have been unable to bring their corn to market in the cold.
The USDA decreased the average 2013 U.S. corn yield in the January WASDE Report by 1.6 bushels per acre to 158.8 bushels per acre. Ending stocks were thus decreased by 161 million bushels due to the decrease in yield and a 100 million bushel increase in use driven by ethanol. 30% more corn was on hand as of December 1st from a year prior, according to the USDA quarterly Grain Stocks Report. 72.4 million bushels of corn were exported during the week ending January 24th, a 150% increase from the 10-week average, according to the most recent USDA Export Report.
China has continued to reject U.S. cargos carrying corn with the unapproved GMO trait, MIR 162 this month. Over 600,000 metric tons of U.S. corn have been rejected so far. The Chinese AgMin biosafety committee will next meet in late March which looks to be the next opportunity for MIR 162 to be approved for Chinese imports. The weakening Chinese demand outlook for U.S. corn has been and will continue to weigh on traders until a resolution is found.
The price of March soybeans decreased by 0.8% in January, closing at $12.84 per bushel. The Brazilian soybean harvest has been progressing well with favorable weather and yields thus far, acting as a primary factor in the decline of U.S. soybean prices. The average 2013 U.S. soybean yield was increased by 0.3 bushels per acre by the USDA to 43.3 bushels per acre in the January WASDE Report. Consequently, U.S. production was increased by 31 million bushels, but the record setting pace of exports in the first quarter offset any major change to ending stocks. We will monitor the extent of the most recent bird flu outbreak in China, which could impact their demand for soybeans.
March wheat prices, again, steadily declined throughout the month by 8.3% and closed at $5.55 per bushel. The USDA increased ending U.S. wheat stocks by 33 million bushels due to decreased use. The top wheat importer of the world, Egypt, announced in late January that the country was in no additional need of wheat until at least mid-May. Canada's bumper wheat crop has and will continue to provide ample supply to the world market. The lack of snow cover has been an issue for winter wheat varieties in the U.S. and if additional snow does not fall and the crop does not enter complete dormancy, yield loss will occur due to frost damage.
South American Crop Condition
Soybean harvest has commenced in the key growing areas of Brazil where farmers are combining soybeans and immediately planting corn. Short dry spells and pressure from Helicoverpa worms have been the only problems for the predicted bumper soybean crop. Brazil soybean production is estimated at 89.5mmt, 9.1% higher than last year, according to the USDA Attaché. Warmer weather is forecasted in central and southern Brazil through early February and dryer weather should help speed along early harvest in northern Brazil.
Corn pollination appears to have gone well throughout Argentina and areas of Brazil in January due to adequate rainfall that relived crops of extremely hot temperatures in late January. Brazil has improved their cargo loading infrastructure in major ports, and we will monitor by how much Brazilian logistics improve. China has been interested in purchasing more Brazilian corn to make up for rejected U.S. corn, but logistics may prevent Brazil from being able to fill such supply.
The weather conditions throughout the South American soybean harvest and corn growing season will greatly dictate world soybean and corn prices. Logistical improvements in Brazil have been made in the last 12 months, although major export delays are still anticipated, which will favor alternative suppliers. We will closely monitor both the weather and logistics in South America in February.
The U.S. Corn Belt has a split moisture situation with very dry conditions present in the west and potentially too much spring moisture in the central region. Nearly no snow is covering areas of South Dakota, North Dakota, Nebraska, and western Minnesota which could lead to a dry spring for planting. Conversely, the extreme cold conditions paired with average snowfall could lead to a delayed spring thaw and wet conditions throughout the central Corn Belt. It is still very early to predict spring planting conditions, but we will cautiously monitor the precipitation throughout February and March.