Top Ten Ag Marketing Stories of 2009
12.23.2009
By Karl Setzer, MaxYield Grain Analyst
Story courtesy of Advance Trading
1. Widespread drought in Argentina boosts U.S. soybean exports—An historic drought affected Argentina’s soybean crop, with production declining more than 30% from the previous year. The shortfall, combined with a slight reduction in output in Brazil, helped the U.S. maintain a large share of the world soybean export market during the spring and summer. Soybean futures recovered from under $8.00 in December of 2008 to a high of $12.91 in June, 2009. As the calendar year concluded, U.S. weekly soybean exports remained brisk, with the key period of the 09/10 growing season for South America just ahead in January/February.
2. Grain industry achieves change in Chicago wheat futures contract to promote convergence—Wheat industry representatives, concerned about the lack of convergence in the market, worked tirelessly with the U.S. Commodity Futures Trade Commission (CFTC) to make adjustments to the contract to improve its effectiveness for market participants. In November, the CFTC approved the CME Group variable storage rate plan for Chicago Board of Trade wheat to begin with the July 2010 contract. This was a prime example of many dedicated individuals working together to develop a more efficient contract.
3. Challenging year for corn producers—The year proved quite challenging for corn producers, starting with a long-delayed planting season due to excess rain across key Midwest growing areas. While record cool temperatures during July were a welcome sight during pollination, they also slowed development of the crop. Finally, record rainfall amounts and ongoing cool temperatures during October resulted in of the slowest harvests in decades, with a significant percentage of corn still in the field at Christmas in the Northern Plains.
4. Weak dollar supports U.S. exports, commodity futures— Macroeconomic developments contributed to a weakening of the U.S. dollar relative to foreign currencies. The U.S. dollar index, which is a measure of the value of the U.S. dollar relative to a basket of foreign currencies, weakened significantly from early March to late November. A weaker dollar helped make U.S. good cheaper to overseas buyers, including grain and oilseed exports, which in turn supported futures prices. As the year ended, however, the dollar was showing signs of a recovery, and will be monitored closely in 2010 as a factor influencing corn, soybean and wheat values.
5. Poor profitability plagues livestock sector, raises questions regarding feed use—Financial margins for livestock producers were poor this year, with most slowing production. This was particularly true for cattle on feed, hogs and milk cows. Despite this , the USDA’s corn feed/residual use forecast for 09/10 is projected to be up 3% from last year. Market observers will be watching the results from quarterly USDA Grain Stocks reports for clues to feeding trends, and also how quickly any rebuilding of animal numbers takes place.
6. Record corn, soybean yields—Producers were generally pleasantly surprised with final corn and soybean yields, with nationwide records being established for both crops. Mother Nature threw the proverbial ‘kitchen sink’ at producers with a late planting season, delayed crop development and wetter-than-normal fall. Yet the USDA pegged the nationwide corn and soybean yields at 162.9 and 43.3 bushels per acre, respectively. This is yet another example of the improvement in seed genetics and the productivity of the U.S. farmer.
7. World wheat production near record for second consecutive year—Bumper world wheat production was seen for a second consecutive year, helping to build carryout stocks that had reached precariously low levels two years ago. Wheat was the first crop to make all-time price highs in 2008, and was also the first crop to see a subsequent major increase in planted acreage. World acreage continued to rise in 09/10, with plantings up more than 6% from the level seen 3 years ago. Prices eroded throughout most of 2009, declining to one-third of the value seen in February, 2008 as world ending stocks are forecast to jump nearly 58% in just two years.
8. Ethanol margins recover—The outlook for ethanol producers improvement significantly. At the close of 2008, the outlook for ethanol producers was shaky at best amid a steep decline in crude oil prices and negative margins. As we prepare to usher in 2010, however, the picture is much brighter on the heels of a steep recovery in oil prices and stable corn values. Ethanol margins correspondingly improved, with a number of idled plants being brought back into production. This sector will be monitored closely in 2010 to see if improved profitability continues.
9. U.S. runs out of soybeans—Basis levels for soybeans were extremely strong this summer during the transition from old- to new-crop. On the heels of an unexpectedly strong export program, the inventory of U.S. soybeans was record low as a percentage of usage at the conclusion of the 08/09-crop year. As a result, many areas effectively ‘ran out’ of beans in late summer, forcing processors and exporters to aggressively compete for available supplies.
10. Modest profits return for chicken integrators, egg producers—In contrast to the livestock sector, modest profits were posted by chicken integrators and egg producers. Expansion in the poultry industry slowed relative to recent years, most notably in broilers, but positive returns were seen for some sectors. Poultry producers have the greatest flexibility to increase output given their short production cycle, although concerns about weak demand may slow a rebound in output. Economic trends will play a key role in this sector over the next year.
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