Fed Data Continues to Prop up Grain Prices
March is one of four months that contain an unusually large number of reports that reflect supply-and-demand conditions for corn and soybeans. The number of reports is larger in January, March, June, and September when various quarterly USDA reports are released.
So far this month, information in the regular monthly reports has been generally supportive for corn and soybean prices. The Census Bureau report of January 2014 exports released on March 7 indicated that cumulative marketing year exports of both crops exceeded the cumulative USDA weekly export inspection estimates. Census Bureau corn export estimates from September 2013 through January 2014 exceeded the cumulative USDA inspection estimates by 29 million bushels. That margin is 10 million less than the average margin of the previous nine years but the largest in four years. For soybeans, the cumulative Census Bureau export estimates through January exceeded the cumulative USDA weekly inspection estimates by 19 million bushels. That margin is 9 million bushels larger than the average margin of the previous nine years and the largest in four years.
The USDA WASDE report released on March 10 contained smaller forecasts of the size of the current harvest of the soybean crops in both Brazil and Paraguay. That same report contained larger forecasts of U.S marketing year exports and smaller forecasts of year-ending stocks of both crops. The National Oilseed Processor Association (NOPA) estimate of the soybean crush by its members dropped below that of a year ago in January, but the estimate for February released on March 17 exceeded that of a year ago by about 5 million bushels. The cumulative soybean crush by NOPA members during the first seven months of the current marketing year also exceeded that of a year ago by nearly 5 million bushels. The USDA projection is for the marketing year crush to equal that of last year.
The USDA's monthly Cattle on Feed report released on March 21 indicated that feedlots with capacity of 1,000 head or more placed 15% more cattle into feedlots during February 2014 than during February 2013. The total number of cattle on feed as of March 1 was only 0.5% less than on the same date last year. While the pace of February placements cannot be maintained into the future because of the limited number of feeder cattle, the larger-than-expected placements will support feed demand in the short run.
In addition to the support found in these monthly reports, weekly reports have also been generally supportive for corn and soybean prices. Weekly estimates from the U.S. Energy Information Administration (EIA) indicate that ethanol production in March 2014 is running about 10% above production in March 2013. Ethanol crush margins also reached record levels last week. Weekly export reports reveal a pace of new sales and shipments for both crops that exceed the pace required to meet the USDA projections for the year.
The most important reports for old- and new-crop corn and soybean price prospects are still to come. On March 28, the USDA will release the Quarterly Hogs and Pigs report. Among other things, this report will reveal the size of the pig crop during the previous quarter (December 2013-February 2014), the inventory of market hogs by weight group as of March 1, and farrowing intentions for the spring and summer months. The estimates will reveal the impact of the porcine epidemic diarrhea virus (PED-V) on the size of the winter pig crop and allow for a projection of pork production for the next year. The estimates will reveal if the recent dramatic increase in hog prices is fully justified and will provide insight into potential feed demand from the hog sector during the last half of the 2013-14 marketing year for corn and soybeans.