Market Situation
Crop Progress. Tuesday’s Crop Progress report from USDA showed a 15% increase in corn planted from the week before. USDA estimates that 88% of the U.S. corn crop was planted as of May 25th (week 21), up from 73% on May 18th. Last year at this time planting was 84% complete. The 30-year average planting pace for week 21 of the crop year is 89%.
Corn Use. Since last fall, the estimated gap between corn production in the 2013/2014 marketing year and corn use has continued to shrink. Last September, USDA estimated that production would exceed use by 1.168 billion bushels; that difference narrowed to 290 million bushels as of the May World Agricultural Supply and Demand Estimates. Since last fall, USDA has increased estimated feed use by 200 million bushels, fuel use by 150 million bushels, and exports by 675 million bushels.
Increased corn use over the course of the winter and early spring has been supported by record high prices and growing profit margins by the users of corn. Prices for slaughter steers, broilers, slaughter hogs, and milk are at or near records. Since late December, ethanol prices have increased almost $1/gallon, up 56%.
Outside Markets. Last Wednesday the Federal Reserve released the minutes from the meeting of the Federal Open Market Committee held April 29th and 30th. The FOMC is charged with making decisions regarding the purchase and sale of securities in the open market by a central bank in order to achieve interest rate targets established by the Committee. This includes the current economic stimulus program known as Quantitative Easing by which the Federal Reserve has expanded its holdings of long-term securities with the goal of putting downward pressure on interest rates in support of economic activity and job creation.
In those minutes, Committee members reviewed staff forecasts of GDP and inflation. Even though forecasts of GDP growth in the first half of this year are slower than the March projections (the impact of cold and snowy weather across much of the country), that slowdown is expected to be temporary with real growth expanding at a faster pace over the next few years compared to last year. Inflation is expected to remain below the Committee’s long-run objective of 2% over the next few years.
The Committee decided that in light of strengthening economic activity and stable inflation expectations, it would reduce the pace of its asset purchases by $10 billion per month, from $25 billion to $20 billion for mortgage backed securities and from $30 billion to $25 billion for longer-term Treasury securities. The Fed kept its benchmark short-term interest rate at near zero.
The prospects for an improving economy after the winter slump are credited with pushing the stock market back to record high levels.
Marketing Strategies
2014 Corn Marketing Plan. I am 40% priced on 2014 feed grain production. My next sales objective is in June around the time of the Acreage report and we have a better handle on crop weather in the growing season. At this time, yield prospects look favorable and acres actually planted tend to increase relative to earlier intentions. Since 2000, the June Acreage report has shown an increase in corn planted compared to the March Planting Intentions survey 11 times; in only 3 years has the Acreage report shown a planted acreage decrease.
Upcoming Reports/Events.
June 2 – Crop Progress
June 6 – Employment Situation for May 2014
June 9 – Crop Progress
June 10 – Short-term Energy Outlook
June 11 – WASDE
June 16 – Crop Progress
June 17 – Consumer Price Index
June 20 – Cattle on Feed
June 23 – Crop Progress
June 27 – Quarterly Hogs and Pigs report
June 30 – Crop Progress, Acreage, Grain Stocks
