Iowa Farmer Today
11-17-07
South American weather key to U.S. market
By Tim Hoskins, Iowa Farmer Today
Corn farmers are advised to pay attention to South America weather conditions
heading into winter.
While traditionally the grain markets have watched South America weather as it
relates to soybean production, they will add corn production in South America
this winter as well, says Bob Wisner, Iowa State University ag economist.
This year, South American farmers were expected to increase production. They
might have increased acres, but the question remains will that translate into
increased production.
In Brazil, it has been too dry and too wet.
In southern Brazil, corn is planted in October or November. That area has been
dry. In addition, a LaNina weather pattern might make a drop in production more
likely in South America. In northern Brazil, the weather has been wet. That
should help the soybean production in that area. Farmers in this area, plant corn
after they harvest soybeans, typically in late February and early March.
In addition, U.S. farmers should pay attention to Argentina weather conditions,
Wisner notes.
“There is potential for market volatility,” he says.
U.S. farmers also should be paying attention to exports and the bidding for acres
for 2008, he says.
“Weekly export inspections are important to follow,” he says.
On the export side, Wisner says corn export sales are running ahead of levels
from 1995. However, while the sales might be on the books, that does not mean
it has been shipped.
Export sales and shipments are up 35 percent. However, weekly USDA export
inspections are only up 1.8 percent.
That could a sign of several things including buyers lining up supplies earlier than
normal.
“That is raising the question, what is holding back inspections?” he says.
Wisner says strong wheat export demand, wheat export inspections are up 71
percent, could be a factor.
Noting there is limited rail and barge capacity, the strong wheat exports could be
holding back some of the corn exports from being shipped.
“It could be a tempering influence on the corn market,” he says.
Wisner says high wheat prices that would discourage feeding it are a factor for
higher corn exports.
“I tend to think the biggest factor is high-priced wheat,” he says.
He says the spread between wheat and corn means the wheat market can fall
before it would affect the price of corn.
That could be an effect of a weaker dollar. That might be the case with Japan,
which is the largest buyer of U.S. corn and the dollar is weak against the yen.
It also affects export sales to Mexico, which is the second largest buyer of U.S.
corn, Taiwan and Korea.
While export sales for corn has been strong, bean export sales started off strong
and then have dropped. That might be due to higher vegetable oil prices.
Wisner, who just returned from China, says the Chinese use soybean oil in their
diet and the higher prices concern them.
In addition, he says the market is looking at acres in 2008.
The first sign will be the amount of winter wheat planted this fall.
Then reduced acres in 2007 for soybeans and cotton have pushed their prices
higher, Wisner notes, making it more attractive for farmers to switch back to
cotton and soybeans that planted corn in 2007.
However, fewer planted corn acres in 2008 sets the stage for tightening corn
supplies and higher prices in the fall of 2008 into 2009.