Growth Energy, a coalition of U.S. ethanol supporters, met on Capitol Hill this week to counter mounting attacks made by the oil industry to repeal the Renewable Fuel Standard.
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Corn prices will fluctuate slightly above $4/bu. through 2020, and corn acres will decline, a new report says. Strong livestock profits will generate growth in cattle and hog sectors, though prices will moderate from current highs.
Row Crop Price Outlook
For corn and soybeans, large U.S. and global supplies will push prices to their lowest levels since 2009, though modest recovery is likely after 2015, according to projections this month from the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri.
Estimates call for farm corn prices of $3.89/bu. for the 2014/15 crop based on Aug. 15 conditions, more optimistic than some forecasts and higher than new-crop bids in many locales. FAPRI sees a slight recovery moving forward, with prices of $4.09/bu. for the 2015/16 marketing year and a gradual rise to $4.25 by 2019/20.
Meanwhile, soybean prices of $10.30/bu. are projected for this year’s crop. The figure will dip to $9.64 for 2015/16. From 2016 to 2019, FAPRI calls for soybean prices between $10.11 and $10.69/bu.
Wheat prices are expected to be $6.27, which is 60 cents per bushel lower than in 2013. They will decline to $5.73/bu. in 2015/16 and fluctuate between $5.72 and $5.97 through 2019/20.
Livestock Price Outlook
For cattle producers, steer prices (total all grades) are forecast to be a record $150.42/cwt. for 2014, up $25 from last year. FAPRI forecasts a gradual price decline as supplies rebuild, from $147.45/cwt. in 2015 to $124.69 by 2019.
Pork barrow and gilt prices are forecast to be $75.96/cwt. this year. That’s a strong recovery over the previous two years. Prices are forecast to fall to $66.93/cwt. in 2015, easing to a range of $55.37 to $59.17/cwt. for the rest of the forecast period.
U.S. per capita meat consumption is forecast to rise from 198.6 million pounds this year to 208.6 million pounds in 2019.
Corn Acres to Drop
Planted corn acres are projected to drop 2 million acres in 2015 to 89.6 million. Acres will increase slightly, to the 91.8 million to 92.3 million acre range, throughout the rest of the forecast period.
Despite the bearish price outlook, corn returns per acre will beat returns for soybeans, wheat and cotton. Corn returns over variable costs will be $288.30/acre this year and will range from $304.14 to $344.54 for the rest of the period, FAPRI says.
Soybean returns over variable costs will be slightly lower at $282.38/acre this year and between $239.31 and $296.32 over the next five years. Because of this, the soybean/corn price ratio is set to decline from 2.65 this year to 2.36 in 2015 before increasing slightly.
As for wheat, returns over variable costs will be $144.72/acre this year before ranging between $133.62 and $146.35 through 2019/20.
Row Crop Demand and Exports Outlook
From this year to 2019/20, FAPRI sees modest increases in corn demand, from 13.6 billion to 14.3 billion bushels. Ethanol and feed demand remain relatively flat, and exports will post modest increases from 1.8 billion to 2.2 billion bushels.
Wheat exports also are forecast to increase slightly, from 938 million bushels this year to 1.07 billion bushels by 2019/20.
Lately, there is a statement I have heard quite often that is a misconception. "Prices have already dropped so far, they can't go down that much more." As far as I am concerned, there isn't much validity to the hopeful way of thinking and recent events clearly show why.
"Prices can't go down much more." This is wishful thinking for any farmer who has not priced their grain going into harvest. Based on facts, prices can fall much farther than current levels. Another way to look at it; grain prices since 2010, when corn started to rally in June with farmers selling bushel after bushel for $4.00 was an unprecedented super rally and it has come to an end.
The recent event; during July 2008 soybeans rallied as high as $15.57/bushel and by March 2009 beans dropped to $7.84/bushel. On May 2014 soybeans were as high as $12.79, and as I write, 12.00PM central time August 28, 2014, November soybeans are trading around 10.30/bushel. If soybeans dropped $7.74/bushel in nine months just six years ago with the current stocks to usage ratio now, there is no logical reasoning they can't drop more at this point into harvest and beyond. Worldwide industries have had inflated prices outside of agriculture that broke and broke hard. There is no economic reason agricultural prices can't break from current price levels.
A Year Ago
Looking 12 months to the day after Labor Day September 3, 2013, December corn opened at $491.00, pushed up to $493.75 and closed the day at $475.25. Prices continued down to $4.10 on December 2nd. As you can see from the tables below, compare estimated supply to ending stocks a year ago to the present, and there really is no factual reason at all, why prices can't fall.
We must remember 2012 threw ending stocks out of whack and, at the same time, China was buying to fill its reserve. Beginning in 2008 many times over the agricultural officials in China announced their goal of filling reserves by 2015 to 85% to 90% of projected needs. It never was a secret. I can't recall the number of times I wrote about it. It was evident by last year with their own corn harvest setting records that they were ahead of schedule. Several publications had reports from private companies such as Rao bank that conducted studies that indicated China was on schedule. Recently, several publications have reports of the "glut" in China. We have seen several times when China in the past two months has auctioned grain from the reserve in order to refresh with new crop and how the auctions many times have only sold a fifth to a third of available grains for sale. Why? Feed companies in China can buy grain cheaper outside of China.
Oilseeds: World TOTAL USE ENDING STOCKS
2012/13 396.59 67.29
2013/14 (Est.) 416.19 80.93
2014/15 Aug (Est.) 426.84 99.53
Oilseeds: United States
2012/13 50.24 5.76
2013/14 (Est.) 51.21 5.23
2014/15 Aug 52.46 13.32
Coarse Grains: World
2012/13 1136.54 169.26
2013/14 (Est.) 1236.13 207.43
2014/15 Aug 1253.13 222.11
Coarse Grains: United States
2012/13 276.23 23.53
2013/14 (Est.) 309.05 32.80
2014/15 310.97 49.06
(Table from August 12, 2014 USDA WASDE Report)
The glaring fact; Ending stocks are growing faster than supply.
Farmers are Storing and Can Hold Until Prices Rise
Well, if this was ever a misconception, I don't know of others better. Farmers sold soybeans at harvest in 2013 and stored corn. A simple question is answered if farmers storing grained worked. What grain rallied in 2014 and what grain fell? Since January 2014 the spot month for soybeans have rallied and corn has dropped. Cash basis for soybeans is tight and cash basis for corn has narrowed only in areas where several competitors buy corn.
An adage that I can't recall failing is, "When big hands own he crop, it rallies." When small hands hold the crop it falls. If there is ever a marketing advice that needs to be committed to memory, this needs to be it.
From the tables above, a real eye opener should be world numbers. As I often say, the U.S. is no longer the bread basket to the world, but now a couple of slices off a large loaf. The utter malarkey now that wheat supplies in Russia and Ukraine will be disrupted with the ongoing travesty of problems is ridiculous. Anyone believing it should think hard. How can wheat in both countries be at a record export pace this year if problems in the eastern section of Ukraine have and are disrupting movement? Recent estimates show wheat harvest HARVESTED record yields and movement may be as much as a third or more than 2013.
Since late winter 2013, reporters have tried to use the Ukraine/Russia turmoil behind daily, or weekly rallies in wheat. A chart easily can tell anyone with eyes that spreaders are buying wheat and selling corn, or buying Chicago wheat and selling Kansas. Since June 18th Kansas wheat was a little more than $1.20/bushel over Chicago. The spread has narrowed over 50 cents.
As summer comes to an end, and as old crop corn and soybeans officially close out on August 31st and new crop officially begins September 1st, after nearly an ideal summer for growing crops, the harvest of the largest yielding crops is about to start at nearly the same time across the U.S. Midwest and the northern hemisphere, grain producers will have to decide what they will do. If recent marketing events can help make a decision a bit easier, selling remains the best course of action.
With bear spreading quite evident and cash basis in many areas helping to show what is about to happen, widening as harvest progresses, it is not too late to sell. If there ever was a time to use marketing strategies to ease the decision, now is the time.
Shares of Deere have fallen 0.3% to $83.76 at 10:01 a.m. today, while Agco has gained 1.1% to $58.74.
World wheat production will rise to a record 713.4 million metric tons in the 2014-15 season, 1.6 percent more than estimated in July and topping the prior year’s harvest of 712.5 million tons, the London-based IGC said today in an e-mailed report. Rising wheat output and higher-than-expected production of corn, or maize, means total grain harvests worldwide will be near an all-time high at 1.976 billion tons, it said.
“With larger-than-expected crops in Russia, the EU and China, world production is forecast at a new record” for wheat, the IGC said. “The world harvest will include an above-average proportion of low-medium grade supplies and, while strong competition from maize is expected in most markets, feed wheat consumption is forecast to rise.”
Wheat futures on the Chicago Board of Trade, the global benchmark, have slipped 12 percent in the past year on the outlook for ample grain supplies. Prices fell to a four-year low on July 29 and have rebounded about 11 percent since then amid concerns that supplies from the Black Sea region will be disrupted because of unrest between Ukraine and Russia.
Global wheat trade was pegged at 146 million tons, higher than last month’s forecast at 145 million tons, the IGC said. Inventories at the end of the 2014-15 season were estimated at 195 million tons, “only slightly higher” than a previous forecast of 193 million tons because of increasing demand, according to the report.Grain Stockpiles
Total stockpiles of grain at the end of 2014-15 will be 426 million tons, a 15-year high, the IGC said. Inventories will rise even though increasing demand for livestock feed will push worldwide consumption to a record 1.952 billion tons.
Global production of corn will rise to 973 million tons, up from the July forecast of 969 million tons. Output still will be below the past season’s level at 982 million tons. Stockpiles will rise to 190 million tons by the end of 2014-15, compared with a previous estimate of 187 million tons.
“Northern Hemisphere yield prospects continued to improve in August” for corn, the IGC said. In the U.S., the top producer, “crops have benefited from a prolonged period of benign weather.”
World production of soybeans will be 304 million tons, unchanged from last month’s forecast, while bigger than the 282 million tons harvested the prior year, the IGC said. The rice harvest may be a record 478 million tons, the agency said, issuing its first estimate for the 2014-15 season. In the prior year, production was 476 million tons.
Vous pourrez lire tous les détails de cette annonce dans l’édition de La Terre de chez nous du 3 septembre prochain.
The Canadian dollar gained for a fourth day after economic growth rebounded to the fastest in almost three years in the second quarter, led by exports and household spending on big-ticket items.
The currency extended a weekly advance against its U.S. peer as Canada’s growth has picked up along with the American economy, which grew at a 4.2 percent annualized second-quarter pace, the Commerce Department said yesterday from Washington. Bank of Canada Governor Stephen Poloz has said it will take another two years to use up slack that built up in the world’s 11th largest economy.
“Even though the headline data came in stronger than the market was expecting, it wasn’t that much stronger that it’s going to cause the Canadian dollar to appreciate too much,” David Bradley, director of foreign exchange trading at Scotia Capital Inc., a unit of Bank of Nova Scotia, said by phone from Toronto. “We had a little bit of a move down to the lows we’ve seen recently” for the U.S. dollar, he said.
The loonie, nicknamed for the image of the aquatic bird on the C$1 coin, rose 0.2 percent to C$1.0844 per U.S. dollar at 9:04 a.m. in Toronto. It touched C$1.0831 after climbing to C$1.0829 on Aug. 27, the strongest since July 29.
The loonie’s weekly gain of 0.9 percent gave it a monthly advance to 0.6 percent. It’s still down 1.6 percent this quarter and 2 percent year-to-date.
The yield on Canada’s benchmark 10-year bond rose to 2.01 percent after touching 1.979 percent yesterday, the lowest since May 2013. It’s down from a 2014 high of 2.80 percent on Jan. 2.GDP Growth
Canada’s gross domestic product rose at a 3.1 percent annualized pace from April to June, Statistics Canada said today in Ottawa, faster than the 2.7 percent economists forecast in a Bloomberg survey. Exports surged 17.8 percent on gains in automobiles, farm and forest products, and household expenditures gained 3.8 percent.
Poloz said Aug. 25 that persistent slack in the country’s labor market and a tendency toward part-time job creation means the central bank has the scope to keep its main interest rate at 1 percent, near historic lows, even if employment picks up.
The Canadian data followed U.S. economic-growth figures that were revised up yesterday from an initial estimate of 4 percent, and following a first-quarter contraction.
“North America in general benefits from a U.S. economic recovery,” Omer Esiner, chief market analyst at currency brokerage Commonwealth Foreign Exchange Inc. in Washington, said in a phone interview. “But it’s still a buy-on-dip situation for USD-CAD. I can see the pair going up to C$1.15.” It last touched C$1.15 in July 2009.
SETTLEMENTS-CME-2014 AUGUST 28 THURSDAY
market-prices supply/demand with relative strength trading
trend: line joining highs with highs, lows with lows=direction
targets-projected length of move
net position/tuesday report, hedgers-sold long, funds-sold short
trends: prices-flat, open interest-lower, supply-estimated higher
trading-net buying, less narrow, up, resistance@365 penetrated
targets: 444-424-391-365 momentum=consolidation
net position/tuesday report, hedgers-sold long, funds-covered short
trends: prices-now flat, open interest-lower, supply-estimated higher
trading-net buying, less narrow, up, resistance@570 penetrated
targets, 570-546-519-497 momentum=initial break-out
net position/tuesday report, hedgers-bought long, funds-sold long
trends: prices-lower, open interest-higher, supply-estimated higher
trading-net buying, narrow, flat, test of bottom@1033
targets, 1285-1201-1134-1033 momentum=less bearish
net position/tuesday report, hedgers-covered short, funds-sold short
trends: prices-lower, open interest-higher
trading-net buying, narrow, flat, support@9205-made lower high
targets 9244-9205-9140-9088 momentum=less bullish
net position/tuesday report, hedgers-inactive, funds-sold short
trends: prices lower+open interest-up@new high
trading-net selling, moderate, up, penetrated-closed below trend
targets 308-301-293-282 momentum=less bullish
Still, robusta for November delivery dropped 0.4% to $2,039 a tonne in London.
"We only had 85/100 of an inch in July and 2/10 of an inch until Monday night," says Denny Rollenhagen, veteran scout who farms near Wells, Minn. Flory thinks USDA may have overstated Minnesota yields in its August report.
Traders may ship Thai raw sugar equivalent to 16 percent of the global surplus against the October contract on the ICE Futures U.S. exchange, the first deliveries from the Asian nation since 2012.
About 625,000 metric tons of the unrefined sweetener will be delivered when futures expire, according to the median of six estimates in a Bloomberg survey of analysts and traders. The forecasts, from companies including Green Pool Commodity Specialists and UBS AG, ranged from 300,000 tons to 2 million tons. The global surplus will be 4 million tons this crop year, according to the International Sugar Organization.
Sugar from Thailand, the world’s second-biggest exporter, has been shipped against ICE contracts only five times since at least July 2008, according to exchange data. Traders are renewing deliveries after Thai stockpiles swelled, contributing to a global oversupply that’s driven down U.S. futures by about 17 percent since June amid a bumper harvest in Brazil.
“The forward outlook now depends on resolving this low-quality surplus sugar, which we think is likely to end up being delivered onto the exchange,” Andrew Slinger, the managing director of Enerfo Sugar Ltd. in Singapore, said in an e-mail on Aug. 26. He didn’t participate in the survey.
Raw-sugar futures for October delivery fell 0.4 percent to close at 15.49 cents a pound on ICE. Prices dropped 5.9 percent this month after an 8.6 percent decline in July. Futures reached a high of 18.81 cents in June. The discount for October versus March widened almost fourfold in the past six months and reached 2.02 cents on Aug. 26.Thai Reserves
Stockpiles in Thailand are estimated to surge 36 percent to a record 4.9 million tons in the season ending in November, according to the U.S. Department of Agriculture.
Inventories accumulated after competition from Brazil reduced demand for the Southeast Asian nation’s sweetener.
Exports declined 18 percent to 3.67 million tons in the first seven months from a year earlier, according to the Commerce Ministry. The delay in selling off stockpiles has hurt the quality and caused the color to darken, said Piromsak Sasunee, chief executive officer of Bangkok-based Thai Sugar Trading Corp., the nation’s top exporter.
The country will produce 12 million tons of raw sugar in the 12 months from November compared with 11.29 million tons a year earlier, Somsak Suwattiga, secretary-general of the Office of the Cane & Sugar Board, said in an interview last month. It may have to carry forward about 900,000 tons of raw and white sugar for shipment next year, Piromsak said by phone Aug. 26.Contract Deliveries
The world market will have a surplus of 1.3 million tons in the year starting October, a fifth straight glut, and a small shortage the year after, Lindsay Jolly, senior economist at the International Sugar Organization, said in Indonesia this week.
Previous deliveries of Thai sugar into U.S. futures contracts were concentrated in March 2011 through March 2012, according to exchange data, when harvests soared to a record. Since at least 2008 traders typically settled U.S. contracts with shipments from Central and South America, the data show.
Open interest for October contracts in New York totals 433,450 contracts of 112,000 pounds, or 22 million tons, data compiled by Bloomberg show. The record for deliveries on the exchange was in October when Louis Dreyfus Commodities bought 1.45 million tons, according to two people at the time.
About 500,000 tons of raw sugar from Central America may also be delivered, said Wayne Gordon, an analyst at UBS in Singapore. Thai shipments may be about 1 million tons, he says.
“You have a situation where a substantial amount of sugar needs to be sold before 2015,” Gordon said. “The pressure is on because you see another reasonably large crop coming. Clearly you need more space by clearing the old stocks.”
Rentech Nitrogen Partners, L.P. is a provider of clean energy solutions and nitrogen fertilizer, to own, operate and grow its nitrogen fertilizer business.
There's growing talk in parts of the central U.S. that once the combines start to roll this fall, getting that crop transported to where it will be stored or marketed could be a challenge.
But, the worries in the Plains and Corn Belt pale in comparison to the logistical hurdles farmers in parts of Brazil face with getting their crop moved to market. It's led specialists to renew their focus on crop losses incurred between the combine and terminal. The ADM Institute for the Prevention of Postharvest Loss at the University of Illinois is one such thinktank for the establishment and implementation of "economically viable technologies, practices and systems that reduce postharvest loss in staple crops such as corn, wheat, and oilseeds."
Logistics and infrastructure have long been a problem for Brazilian farmers, and as that country's crop land and production increases, it's only taxing the nation's dirt roads and rural highways further. And, that's been a big driver of as much as a 12% postharvest loss of grain because of simple transportation problems, namely because of a combination of that poor infrastructure and farmers' rush to get their crops harvested and to market. That hustle is made worse by the fact farmers plant, manage and harvest not 1, but 2 crops in Brazil each year.
"Clearly there are things that you can do to reduce loss—you can put bed liners in trucks, you can adjust your combine, you can harvest more slowly -- but for the farmers in Mato Grosso, it’s not a high priority," says University of Illinois ag economist Peter Goldsmith in a university report. "It doesn't seem rational. If you see soybeans bouncing off your windshield from the truck ahead of you and bands of soybeans along the berm, why wouldn't you try to prevent it? It appears that farm managers in Brazil actually allow loss to happen because the cost of reducing loss is greater than the benefits."
Goldsmith, long a student of Brazilian agriculture, works with the ADM Institute for the Prevention of Postharvest Losses to create practical, easy-to-implement solutions, but more importantly, foster understanding among farmers and farm managers in regions like Mato Grosso that by making a few key adjustments, crop income can rise by a considerable amount.
"Because they are in such a hurry to get the soybean crop harvested so they can get the maize crop planted before the rainy season, they may: harvest too fast, desiccate green soybean to advance harvest, or expose soybean to the weather during transport, all of which results in a 10% loss. The loss isn’t intentional but rather a level that the farm manager is willing to live with in order to get that second crop of corn," Goldsmith says. "When a farmer doesn’t think that harvest speed is important, they have more loss. Likewise, if a farmer doesn't think that combine adjustments are important they'll have more loss. Those who realize that maintaining equipment is important, have less loss. Consequently, technical training in the field with the equipment could be beneficial. But the cost of reducing loss further, using current technology, may exceed the benefits. Farmers may be unwilling to pay or invest in loss reduction."
Factors contributing to postharvest loss that Goldsmith and other specialists are honing in on for farmers in Brazil include:
Goldsmith points out that while these may be obvious factors to consider to U.S. farmers, both a general lack of education and the growing rush to get the crop from the field to the marketplace tend to keep them in the back of Brazilian farmers' minds.
"Why wouldn’t farmers have agreed 100% that harvest speed contributes to loss? Insects and rodents seemed to be unimportant. Truck conditions and bad weather were the top factors to blame for loss, but truck conditions were mentioned by only 62%. These causes should be common knowledge so I don’t know why 100% of the responses didn’t agree that, for example, poor road and truck conditions contribute to loss," he says. "The lack of definitiveness about this may indicate that loss is not a 'front-of-mind' issue for managers, which, in turn, has significant implications for policy makers seeking to reduce post-harvest loss.
"We may think of Brazil as sunshine and beautiful all the time, but farming is really tough in the tropics. There are pest pressures 24/7, soils are poor, there’s an extreme rainy season, distance to markets is great, and road conditions are very rough. All sorts of factors make farming tough, but this area of the world has the greatest potential to materially augment global grain supplies," Goldsmith adds.
Though these issues have major implications for farmer profitability in Brazil right now, there are also more global implications, both to the grain marketplace and issues well beyond the farm gate. And, how these issues are addressed will go a long way to establishing Brazilian farmers' roles in the global grain market down the road.
"This dominant class of medium- and large-tropical farm acreage operators who are producing most of the new grains are filling the gap between where we are now and where we need to be in 2050 to feed the world," Goldsmith says in a university report. "Sure, we can expand our crop among the developed countries of the world, but we’re only helping at the margin. The potential for new grain producers on new land is coming from farmers in the Southern Hemisphere."
(Reuters) - Brazil fell into a recession in the first half of the year as investment fell sharply and the country's hosting of the World Cup suffocated economic activity, a major blow to President Dilma Rousseff's already fading hopes for re-election in October.
Latin America's largest economy has suffered stagnant growth for more than three years under the economic policies of the left-leaning Rousseff, which have dented consumer and business confidence and caused heavy losses for financial investors.
The economy took an even bigger downturn in the second quarter, with gross domestic product contracting 0.6 percent from the first quarter, government statistics agency IBGE said on Friday. It also revised lower its estimate for first-quarter activity to a 0.2 percent contraction, meaning the economy entered a recession.
The data that confirmed the recession, Brazil's first since the global financial crisis of 2008-09, gives a powerful weapon to Rousseff's opponents in the Oct. 5 election at precisely the moment that her candidacy is at its most vulnerable.
Polls over the last week have shown Rousseff falling behind centrist candidate Marina Silva in the event of a second-round runoff, which appears likely.
Silva and the other main opposition candidate, Senator Aecio Neves, have strongly criticized Rousseff for being weak on inflation and ruining the economic momentum that made Brazil a Wall Street darling last decade.
"This is the last thing that the government would have wanted or needed. But I think it's too late to turn (the economy) around" before the election, said Neil Shearing, an economist at Capital Economics in London.
Brazil's economy grew an average 4 percent under Rousseff's predecessor, Luiz Inácio Lula da Silva, from 2003 to 2010. Growth under Rousseff's watch is set to average less than 2 percent.
Brazil's stock market rose slightly, as investors focused less on the bad economic report and more on the increasing possibility that Rousseff might not be re-elected. One equities investor on Wall Street e-mailed simply: "Hallelujah."
Despite Rousseff's recent drive to win back business confidence, investment slid 5.3 percent in the second quarter, its worst performance since early 2009. Manufacturing suffered its fourth straight quarterly decline, down 1.5 percent.
Business activity also slowed as Brazil hosted the World Cup soccer tournament in June and July. Many cities declared public holidays on game days to prevent traffic problems and other logistical issues. Some factories began ramping down production before the tournament started in anticipation of disruptions.
Rousseff and her economic team have blamed the slowdown on continued problems abroad, such as in southern Europe.
"I want to emphasize that even really organized countries are having problems getting better growth," Finance Minister Guido Mantega told reporters.
He said gross domestic product data suffered because of unique, seasonally related statistical effects, and stressed the unemployment rate has been low and stable. As a result, he said he believed Brazil's situation did not really constitute a recession.
COMMODITIES DEMAND SLACKENS
Global demand for Brazil's major commodities such as iron ore, sugar and corn also slackened, compared to the glory days of last decade, when the economy often grew more than 5 percent a year, lifting some 35 million people out of poverty.
However, economists and business leaders said Brazil's recent problems are mostly home grown, and are far deeper than any short-term considerations such as the World Cup.
They have repeatedly complained of what they describe as Rousseff's heavy-handed management of the economy - such as alternately raising and lowering certain taxes. They said her policies have relied too much on stimulating domestic demand at the expense of investment.
Other Latin American countries such as Chile or Colombia, where trade accounts for a bigger percentage of the economy and the business climate is perceived as better, have enjoyed much stronger growth in recent years.
Economists said Brazil's next president - whoever it may be - would need to undertake deep reforms.
"We need a new economic program," said Eduardo Velho, chief economist at INVX Global, an investment fund in Sao Paulo.
Following the data, some economists said they would revise down their forecasts for full-year economic growth to zero.
Brazil's central bank raised interest rates earlier this year to counter a spurt in inflation, which contributed to the slowdown in the second quarter.
The second-quarter GDP drop was worse than expectations of a 0.4 percent contraction, according to the median forecast of 47 analysts polled by Reuters.
Other data released on Friday showed Brazil posted a primary budget deficit in July for a third straight month. Brazil's faltering growth has hurt tax revenues, making it harder for Rousseff's government to pay down debt.
US - In a year full of surprises, one that has become a bit lost is the lack of growth in the US chicken business, report Steve Meyer and Len Steiner.
Most analysts went into 2014 expecting US chicken companies to quickly ramp up production to take advantage of lower grain costs and their price advantage in the market place.
Chicken having a price advantage is nothing new but the situation this year set up perfectly for higher output and lower but still profitable prices which would provide an even larger than normal advantage against high priced beef and well priced pork.
Beef and pork have more than held up their end of that deal but chicken output growth has been a non-starter. But even those tighter than expected supplies — and thus availability/consumption — have not been able to light a fire under retail chicken prices.
What gives? Let’s go all the way back to 2011 and 2012 when livestock and poultry companies were paying through the nose for feed ingredients. Any thoughts of growth were canned as were, we understand, a large number of orders for breeder birds at the three major broiler genetics companies, Cobb Ventress (owned by Tyson), Hubbard and Aviagen. Those companies quite understandably reduced production capacity.
Fast forward to the winter of 2012-2013 when US companies were still paying huge prices for feed ingredients and Mexican broiler farms broke with avian influenza. Depopulation of Mexican breeder flocks created an opportunity for US breeders to sell genetics — primarily in the form of fertilised eggs, we understand — south of the border.
The reduction of breeder egg supplies continued well into 2013 even as the 2013 crop developed well, causing some optimism that exorbitant feed costs were behind us. The combination of cutbacks in the breeder flock and selling eggs to Mexico resulted in an aged flock as cost conditions changed.
We expected US chicken companies to begin ramping up their breeding flocks in mid-2013 just in case crops turned out large and costs fell. They were slow to do so but did increase flocks by over four per cent, year-on-year every month form August through November last year.
Then the wheels came off. US breeder flock growth slowed to about three per cent in December through February and then slowed even further this year as breeding companies ran into a number of production difficulties in associated with that aging flock. The result was significantly lower numbers of chicks placed versus eggs set.
Beginning of month broiler breeding flock inventories have begun to grow again, exceeding year?ago levels by 2.2 and 2.1 per cent in July and August. But those growth rates may be short lived as the number of broiler breeder chicks hatched fell to just 6.212 million in July, over 300,000 and 5.4 per cent fewer than one year ago. Lower numbers of breeder chicks will make it more difficult to support the renewed growth of the breeder flock which, in turn, will limit egg sets and placements of the actual broiler chicks that are grown for slaughter.
USDA’s August World Agricultural Supply and Demand Estimates has 2014 US broiler production growing by 1.5 per cent. Poultry production through 16 August is virtually unchanged from last year.
With two thirds of the year in the books at zero growth, September-December production would have to grow by 4.5 per cent to get the annual number to 1.5 per cent. We think that is very doubtful even though there are signs of improvement on the productivity front. After spending virtually all year within 1 per cent of year?ago levels, egg sets have grown by 2.1 per cent, on average, over the past four weeks.
Chick placements, which had been down fractionally versus last year for most of this year, have grown by 1.8 per cent and 1.2 per cent, year on year the weeks of 9 and 16 August. Those figures will not get the industry to +4.5 per cent but they represent improvement. USDA’s forecast for 2015 broiler output is 38.894 billion pounds, read?to?cook weight, an increase of 2.4 per cent from 2014.
BOTTOM LINE: US broiler companies have been profitable but have had their expansion efforts scuttled by production challenges. They are solving those problems and will move back to growth this fall and into 2015 but that growth will likely be slow by historical standards.
A corn-based ethanol plant in the northeast South Dakota town of Rosholt has reopened after sitting idle for 18 months.
Thirty employees are working in production at the Red River Energy plant, which began grinding corn on Monday.
"The margins are good in ethanol, corn is abundant at this point with a record crop coming in," general manager Rick Serie told the Public Opinion in Watertown. "We're optimistic about our future here. We have to get up and operating at full capacity, but we see good margins being a success for the investors and the community"
Serie admitted there could be some hiccups after the plant sat idle for so long, "but we're working through them," he said. "We have a real experienced staff that knows how to fix and tweak as we start up."
Officials plan to ramp up annual production from 25 million gallons to 40 million gallons, and launch other projects including corn oil extraction and increased storage capacity for ethanol and distillers grains—a byproduct used as livestock feed.
The plant is operated by Kansas-based ICM Inc., under the management of Energy Management Solutions. A skeleton crew took care of the facility after it was idled in early 2012.
The International Grains Council raised to a 27-year high its forecast for world corn inventories, citing improved hopes for crops in Brazil, Europe and Ukraine, as it hiked again its estimate for grain supplies.
The intergovernmental group raised by 3m tonnes to 190m tonnes its estimate for world corn stocks at the close of 2014-15 – up 17m tonnes year on year and "their largest since 1987-88".
The estimate, which takes the IGC's figure above the USDA forecast for a 15-year top in world inventories, reflected an improved forecast for global production, upgraded by 4m tonnes to 9763m tonnes.
"Northern hemisphere [corn] yield prospects continued to improve in August, including in the US, where crops have benefitted from a prolonged period of benign weather," the council said.
"The outlook for corn is notably higher, with a record outturn in the US and upward revisions for Brazil, the European Union and Ukraine."
Corn vs wheat
However, the council also, turning to consumption trends, highlighted the enhanced rivalry in the feed market with wheat, following a low quality harvest in many producing countries, such as France.
"The world [wheat] harvest will include an above-average proportion of low/medium grade supplies," the IGC said, a factor which would become evident in "strong competition in most markets" between corn and wheat.
The "increasingly tight outlook for premium quality [wheat] supplies", combined with Ukraine concerns, had also curtailed the decline in wheat prices despite improving overall production prospects here too.
The IGC lifted by 11m tonnes to a record 713m tonnes its estimate for global wheat output, citing "larger-than-expected crops in Russia, the European Union and China".
Rice stocks to drop
For grains overall, the IGC raised its production estimate by 17m tonnes to 1.976bn tonnes, just behind the 2013-14 record of 1.992bn tonnes.
The estimate for world inventories at the end of 2014-15 was lifted by 7m tonnes to 426m tonnes – up 22m tonnes year on year, and the highest in 15 years.
The council also, in its first forecast for world rice output in 2014-15, estimated production at 478m tonnes, up 2m tonnes year on year, but insufficient to cover increased output, viewing rising by 6m tonnes to 482m tonnes.
The dynamics will leave carryover stocks falling for a second successive season, albeit remaining at a historically high level of 105m tonnes.
Futures have rebounded 11 percent since touching a four-year low on July 29 as the conflict in the Black Sea region worsened. Separatists in eastern Ukraine are battling government forces on two fronts near the Sea of Azov and south of Donetsk after NATO reported a surge of Russian troops and advanced equipment into the war-zone. Ukraine and Russia account for 21 percent of global wheat exports, according to U.S. Department of Agriculture estimates.
“The situation in eastern Ukraine has put a strong bid into wheat, with the market concerned that wheat from either Russia or Ukraine shall not be available on the world market,” economist Dennis Gartman said in an e-mailed report today. “Things are still moving from the ports there, but clearly there is concern that should the ‘war’ escalate those exports will be stopped.”
Wheat for December delivery rose 0.7 percent to $5.76 a bushel at 7:37 a.m. on the Chicago Board of Trade, after touching $5.7925 yesterday in intraday trading, the highest since July 3. Prices are set to rise 2.4 percent this week and have rallied 8.6 percent in August.
In Paris, milling wheat for November delivery rose 0.4 percent to 175.75 euros ($231.69) a metric ton on Euronext, set for a 3.1 percent increase in August.
Soybeans for November delivery rose 0.2 percent to $10.3125 a bushel in Chicago, paring a monthly decline to 4.7 percent. Corn for delivery in December fell 0.3 percent to $3.68 a bushel, little changed this month.
That is, of course, assuming no disaster in Ukraine.
A quiet agricultural revolution is underway in North Dakota.
The change is hard to detect because it’s happening in the specialized field of soil fertility.
This summer, North Dakota State University unveiled new soil fertility recommendations for corn, which is planted on 3.85 million acres across the state.
The 11-page guide makes it clear that no-till soil is distinct from tilled soil. NDSU experts say farmers with fields dedicated to continuous no-till, for six years or longer, need 40 to 50 pounds less nitrogen per acre to grow corn than producers with tilled fields.
The recommendation is revolutionary because NDSU is the only land grant university in the U.S. that has adjusted its corn fertility recommendations to account for the benefits of zero tillage and conservation agriculture.
The corn guidelines echo an earlier NDSU recommendation for spring wheat and durum, which gave a 50 lb. nitrogen credit for long-term no till practices.
Jill Clapperton, a soil consultant in Montana and former Agriculture Canada scientist in Lethbridge, said what’s happening in North Dakota is unprecedented.
“That is a really huge deal,” said Clapperton, who’s known for her expertise in the rhizosphere, which is the region where the plant roots interact with the soil.
U.S. land grant universities have developed soil nutrient recommendations in their individual states for decades. The guidelines aren’t etched on tablets but many U.S. farmers believe they are gospel, Clapperton said.
“When you get your soil test results and you’re in Idaho, it’s based on the recommendations set by the land grant universities. And nobody goes against them.”
Kristine Nichols, chief scientist with the Rodale Institute, an organic agriculture research centre in Pennsylvania, agreed the new NDSU guidelines are significant.
“It’s fallen on the land grant universities to provide new (soil fertility) standards based on conservation agriculture practices,” said Nichols, who was a U.S. Department of Agriculture soil microbiologist in North Dakota.
“It was a very big step NDSU (took), in making those recommendations.”
Dave Franzen, NDSU extension soil science specialist, led the effort to develop the new recommendations. Instead of simply telling no-till farmers to use less nitrogen, Franzen has created tables according to the price of nitrogen and the market price of corn. He has developed tables for conventionally farmed soil and others for long term no-till soil, depending on geography and soil productivity.
Franzen said the recommendations are based on analysis of no-till data in North Dakota that goes back to the 1970s.
“I started working on it in 2005 and we gathered another 50 to 60 sites,” he said.
“No preconceived ideas. I just divided the sites into those that I knew were on a long-term no-till and those that I knew were conventional.”
Franzen was surprised by the results.
“If you look at a certain yield and the nitrogen it took to produce it in a no-till (system) … it took about 50 lb. of less N with the long-term no-till.”
Franzen said zero till combined with a diverse crop rotation enhances soil biology, which might explain the need for less nitrogen on no-tilled fields.
Clapperton was more absolute. She said improved soil biology is definitely the reason why no-till fields require less nitrogen.
“It’s very clear from NDSU’s data and data from various universities that work on no-till … showing we’ve got a lot more nutrients in the no-till soils,” she said.
Zero tillage and the associated increase in biological activity boosts the amount of nitrogen stored in the soil, she added.
“It’s like putting fertilizer in the bank because it (nitrogen) is bound in this organic form, which can be released later … which means (it) can then be turned into, through a process of mineralization, to an inorganic form that the plant can take up.”
Clapperton said the same process occurs in tilled fields, but there is significantly more biological activity in no-till soil. As a result, no-tilled soil can supply more nitrogen to the crop.
“With this much microbial activity in your soil and this much organic carbon … this is the potential of your soil to supply X amount of nitrogen.”
Nichols said the recommendations are an endorsement of a burgeoning agricultural movement in North Dakota, where zero tillage, cover crops and diverse rotations have become cornerstone values on many farms.
“There are people who are really excited … that (NDSU) has come out with these recommendations,” she said.
“Having worked with Manitoba-North Dakota Zero Tillage Association … it’s always been a big part of their meetings to (see) how can we get new standards. They (the recommendations) weren’t keeping up with what we’re seeing in our systems.”
Nichols said it’s difficult to know if other land grant universities will follow North Dakota’s lead. Change is often slow at such institutions, and conducting the necessary studies may not be a priority.
“I think that’s been one of the biggest impediments to getting new fertility standards,” Nichols said.
“We don’t have the funding and capital to re-evaluate for conservation agriculture.”