Outlook for ag improving

The outlook for grain farmers has changed significantly in recent months.  Purdue ag economist Chris Hurt says new crop prices for both corn and soybeans have moved closer to the cost of production. “I think it’s an overall improvement from where we were, but we were at pretty low levels,” he says.  “I think if we compare that to 2013 – we’re certainly looking for tighter margins, reduced incomes, which will likely pull the total US farm income down somewhat.”

Hurt tells Brownfield there is not a lot farmers can do at this point to reduce their costs to help their bottom line, but there are some changes that can be made.  “Maybe some of the applications we have looked at in the past, where producers were trying to protect the bushels that are out there from any kind of pests will be evaluated a little closer this spring and summer,” he says.

With the high prices in recent years, he says producers were more inclined to spend those extra dollars on inputs to increase yield potential.

But, with lower prices and tighter margins, Hurt anticipates farmers will evaluate those expenditures more closely.

AUDIO: Chris Hurt, Ag Outlook (3:30mp3)

Eli Lilly to acquire Novartis

With the goal of strengthening and diversifying Eli Lilly & Company’s animal health business, Elanco, the company will purchase Novartis Animal Health.  In an announcement this morning, Jeff Simmons, senior vice president of Eli Lilly and president of Elanco said animal health continues to be a growth opportunity for Lilly.

The acquisition will expand and complement Elanco’s product portfolio, R&D, and manufacturing capabilities.  Simmons says, “Combining these two great companies will enable us to provide more diversified brands, reach more market segments, expand our global footprint, and strengthen our pipeline, capabilities and expertise.”

Upon the completion of the all-cash $5.4 billion deal, Elanco will be the second-largest animal health company in terms of global revenue, solidify its number two ranking in the US, and improve its position in Europe.

The transaction is expected to close by the end of the first quarter of 2015, subject to clearance of all antitrust regulations both in the US and other countries.

Big week for corn inspections

USDA reports corn export inspections for the week ending April 17 were larger than expected, while soybeans and wheat were within pre-report estimates.

Wheat came out at 495,250 tons, down 216,977 from the week ending April 10 and 223,097 lower than the week ending April 18, 2013. For the 2013/14 marketing year to date, wheat inspections are 27,762,995 tons, compared to 23,719,275 in 2012/13.

Corn was reported at 1,599,228 tons, up 119,388 from the previous week and 1,272,979 higher than this time last year. So far this marketing year, corn inspections are 26,800,734 tons, compared to 11,951,498 a year ago.

Soybeans were pegged at 138,777 tons, 129,652 less than the week before, but 686 more than last year. At this point in the marketing year, soybean inspections are 41,084,185 tons, compared to 33,674,804 a year ago.

Sorghum inspections totaled 270,549 tons. That’s an increase of 64,079 tons on the week and 254,371 on the year. 2013/14 sorghum inspections are 2,814,119 tons, compared to 1,356,957 in 2012/13.

Commerce Department to investigate Mexican sugar imports

The U.S. Commerce Department says it will investigate charges that Mexico is dumping sugar cane and sugar beets below cost on the U.S. market. The American Sugar Alliance filed a complaint with the Commerce Department and the U.S. International Trade Commission in March charging “The Mexican sugar industry, 20 percent of which is owned and operated by the Mexican government, has rapidly increased exports to the United States in recent years, rising from 9 percent of the U.S. market in FY2012 to nearly 18 percent in FY2013. And, according to recently updated U.S. Department of Agriculture (USDA) data, Mexico is accelerating its rate of exportation in FY2014.”

The ASA contends the increases are “being fueled by substantial subsidies and by dumping margins of 45 percent or more.” The organization contends the Mexican action will cost U.S. producers nearly $1 billion this year.

The U.S. International Trade Commission is responsible for determining whether or not domestic producers are injured by dumped and subsidized imports. It is expected to make a preliminary determination in May.

Mexico’s Agriculture Ministry disputes the charges saying all of their exports are legal.

 

Report discusses corn trade disruptions

Losses to the U.S. agricultural industry resulting from China’s rejection of corn shipments containing the MIR 162 trait could be as high as 2.9 billion dollars.

That’s according to a report released by the National Grain and Feed Association.  NGFA says the bulk of that loss is in an estimated 11-cent per bushel lower average price paid to farmers for their corn.  The estimate also includes losses to corn exporters and sellers of DDGs, as well as China’s rejection of several soybean shipments which it claims contained the banned corn variety.

In the U.S., the MIR 162 variety is marketed by Syngenta as Agrisure Viptera.  The report warns that more trade disruptions and economic losses are possible in the next marketing year due to the introduction of another Syngenta biotech variety into the supply chain.  That product, called Agrisure Duracade, is being planted in the U.S. for the first time this spring.

Viptera and Duracade have both been approved for use in the U.S., but have not received Chinese approval.

Beef exports hit marketing year high

USDA reports corn, soybean, soybean product, and wheat export sales for the week ending April 10 were within pre-report estimates. Physical shipments of corn and soybeans were more than what’s needed weekly to meet USDA projections for the 2013/14 marketing year, but wheat fell short of its mark.

Wheat came out at 438,000 tons (16.1 million bushels), up sharply from the week ending April 3 and 48% higher than the four week average. Brazil picked up 85,000 tons and Peru bought 64,600 tons, while Nigeria canceled on 50,000 tons. For the 2013/14 marketing year to date, wheat sales are 1.129 billion bushels, compared to 964.1 million in 2012/13. Sales of 359,900 tons (13.2 million bushels) for 2014/15 delivery were mainly to unknown destinations (211,600 tons).

Corn was reported at 601,900 tons (23.7 million bushels), down 9% from the previous week and 36% lower than the four week average. Japan purchased 161,000 tons and Israel picked up 120,000 tons, while unknown destinations canceled on 268,400 tons and China canceled on 168,000 tons. So far this marketing year, corn sales are 1.676 billion bushels, compared to 634.1 million this time last year. Sales of 192,600 tons (7.6 million bushels) were to Japan (141,800 tons) and unknown destinations (50,800 tons).

Soybeans were pegged at 19,200 tons (700,000 bushels), 76% less than the week before and 79% under the four week average. Indonesia bought 58,000 tons and Japan purchased 34,900 tons, but unknown destinations canceled on 68,200 tons and China canceled on 54,700 tons. At this point in the marketing year, soybean sales are 1.639 billion bushels, compared to 1.345 billion a year ago. Sales of 400,700 tons (14.7 million bushels) for 2014/15 delivery were primarily to unknown destinations (330,000 tons) and China (60,000 tons).

Soybean meal came out at 36,600 tons, 80% below the prior week and down 84% from the four week average. Venezuela picked up 40,000 tons and Mexico bought 23,300 tons, while unknown destinations canceled on 84,500 tons. Cumulative soybean meal sales for the current marketing year are 8,727,400 tons, compared to 8,388,900 last year. Sales of 84,000 tons for 2014/15 delivery were to unknown destinations (80,000 tons) and Mexico (4,000 tons).

Soybean oil was reported at 5,500 tons, 63% more than the previous week and 40% above the four week average. Mexico purchased 4,400 tons and Venezuela picked up 1,500 tons. 2013/14 soybean oil sales are 577,700 tons, compared to 829,000 in 2012/13.

Net beef sales were a marketing year high at 21,900 tons; that’s up 18% from the week before and 42% higher than the four week average. The listed buyers were Japan (7,800 tons), Mexico (3,800 tons), South Korea (3,500 tons), Hong Kong (2,400 tons), and Canada (1,500 tons).

Net pork sales totaled 8,600 tons. That’s larger than the prior week and 15% more than the four week average. The reported purchasers were South Korea (2,300 tons), Canada (1,800 tons), Japan (1,500 tons), Mexico (1,100 tons), and the Philippines (500 tons).

Board directs rail industry to provide delivery plans

Given the immediate need for fertilizer for farmers entering the planting season, the Surface Transportation Board will now require reports from the rail industry on its plans to ensure delivery of fertilizer to farmers in the upper Midwest.

Steve Sharp president of Consumer United Rail Equity applauds the STB’s decision.  He says, “It’s in the best interest of all parties to ensure that farmers have all the necessary inputs to produce a crop during the upcoming growing season.”

According to the STB, the Canadian Pacific Railway Company and BNSF Railway have been directed to report by April 18, 2014 their plans to ensure delivery of fertilizer.  The board further directed CP and BNSF to each provide weekly status reports, over the next six weeks, beginning April 25, 2014 regarding delivery on their respective networks.

Global Dairy Trade prices continue to decline

Global Dairy Trade Auction Tuesday saw overall prices decline 2.6 percent, the fifth consecutive decline at the auction but significantly less than the 8.9 percent tumble two weeks ago. In fact, this is the smallest decline since the February 18th sale. This is the lowest overall average price since February of 2013.

The only increase was anyhdrous milk fat up 0.6 percent. Whole Milk powder was down 1.6 percent from the last sale, cheddar cheese is 3.3 percent lower, rennet casein down 4.3 percent, skim milk powder declined 4.4 percent, butter down 4.9 percent, milk protein concentrate fell 7 percent and butter milk powder dropped 8.6 percent compared to the April 1st sale. No lactose was offered for sale.

The auction triggered a busy day in the nonfat dry milk market on the Chicago Mercantile Exchange although the price held steady. There were 11 loads sold, 10 bids unfilled and 1 offer uncovered.

Read more GDT results here

 

USMEF questions sustainability of Mexican market

U.S. beef exports to Mexico are strong so far this year, but there are questions about whether it can continue. The U.S. Meat Export Federation (USMEF) says the value of beef shipped to Mexico from the U.S. is up 40 percent. However, Meat Export Federation Regional Director Chad Russell says that level may be difficult to sustain.

“I think that the price point and the high prices of beef will still create challenges on behalf of the normal Mexican consumer being able to afford those cuts,” said Russell, in comments provided by the USMEF.

Mexican beef production suffered from the same drought affecting Texas and the Southwestern U.S. Plus, Russell says Mexico shipped a lot of their feeder cattle to the U.S.

“If our prices of U.S. beef were at historical levels, it would be great opportunity to ship more product down [to Mexico], but the problem is is our prices are not at that level at this point,” he said.

U.S. pork exports to Mexico are also strong so far in 2014 with 36 percent of Mexico’s market share.

Smithfield parent to offer IPO

The world’s biggest pork producer wants to raise some cash. China’s WH Group, the company that purchased Smithfield Foods says it will offer 3.65 million shares on the Hong Kong stock exchange. Estimates are the shares would sell from $1.03 to $1.45 raising between $4.1 and $5.3 billion (U.S.). The IPO price will be set next week with trading scheduled to launch April 30th.

WH Group was known as Shuanghui International Holdings prior to the Smithfield acquisition. Australia’s Sky News says most of the money raised by the sale would be used to pay off the loan the company took out to buy Smithfield less than a year ago.

In a related story, it is being reported that two top executives at WH Group are getting nearly $600 million in shares as a “reward” for making the Smithfield deal happen.