Orville Fisher White Corn Newsletter 2013 Planting Intentions and Crop Update

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1 Orville Fisher White Corn Newsletter 2013 Planting Intentions and Crop Update July, 2013 INSIDE THIS ISSUE New Crop Planting Progress and Conditions Page 2 Market Prices Page 4 Orville Fisher White Corn Newsletter Subscription Year: 2013 Issue No. 1 US New Crop Planting Intentions Page 6 US Supply and Demand Page 7 US Exports Page 8 Mexico Maize Page 11 Republic of South Africa Maize Page 14 Global Risk Management Publishing Group 2011 by Global Risk Management, Inc. All rights reserved. Reproduction and distribution prohibited without prior permission For subscription information: Address: 600 Inwood Ave, Suite 250 Saint Paul, MN U.S.A. Phone: Fax: cmorley@grmcorp.com STAFF Editor-in-Chief: Chris Morley Assistant Editor: Max Thomas-Olson ORVILLE FISHER WHITE CORN NEWSLETTER July,

2 New Crop Planting Progress and Conditions This crop year started off with some of the wettest planting conditions in years. While excessive spring rains and cooler temperatures did delay crop plantings, they also recharged the depleted subsoil moisture levels left over from last year s drought. These conditions played havoc with our ability to secure a planted acreage number. Even as late as mid-may the planted acreage expectations were over 10% higher than the number reflected in this report. Once the corn was in the ground, weather patterns were favorable with warmer temperatures and scattered precipitation allowing the corn to catch up in maturity. The longer term forecast is for cooler temperature and scattered rains which will be very important for crop development as the majority of corn will be pollinating in the next 2 weeks. Below are field reports from the key white corn growing regions. Nebraska/Missouri Due to irrigation, the Nebraska white corn appears to be in pretty good shape. The extreme southeastern corner where it's mostly non-irrigated has seen better rains than the rest of the state and to date hasn t really lost any yield potential. The Northeast corner of Missouri is experiencing very similar conditions, but isn t as heavily irrigated but dry conditions are starting to creep back in White corn in this region is on track to pollinate from July 20th 30th, or about a week to 10 days behind normal. Consequently receiving the forecasted rains over the next 10 days will be important. Southern Indiana/Northern Kentucky Excess moisture early in the season delayed planting by about 2-3 weeks. Despite this only about 1% of the total planted acres were drowned out. Because of this delay, pollination should start to occur the week of July 29th instead around July 10 th in a normal year. Overall the crop is currently in very good shape, but due to the wet spring the plants have developed a shallow root system. This limits the plants ability to access the subsoil moisture and will require timely rains to maintain a good to excellent rating. Central Illinois The conditions are favorable, despite the late plantings pushing back the crop about 10 days or so. This means pollination will be taking place around the last few weeks of July. Last years drought effects have been fully erased and as of July 19th, the Crop condition rating is the best since Garden West Area of Texas This crop is in excellent shape and harvest is starting or underway. While this area is still experiencing severe drought conditions, there were very timely rains and temperatures rarely got above 90 degrees during pollination. Also, the majority of the white corn crop in this area is under irrigation, off-setting some of the impact that the lack of precipitation had on development and yields. Anecdotal yield reports for this area so far indicate record to near record yields All Corn Crop Progress Report The USDA NASS reported that as of July 21, 2013 the corn crop was reported 63% good/excellent, a decline of 3% from last week. This compares to 26% last year and the five year average of 59%. The poor/very poor rating was 11%, up 2% from last week and compares with 45% last year. The corn silking report was also released, showing 43% silking. This compares to 84% last year, and the five year average of 56%. ORVILLE FISHER WHITE CORN NEWSLETTER July,

3 Major U.S. White Corn Producing Regions (Source: GRM/ Industry sources) Good shape heavily irrigated and timely rains Very good shape, still need timely rains, late pollination Drought but good shape, timely rains, cool temps and irrigation ORVILLE FISHER WHITE CORN NEWSLETTER July,

4 Key Global White Corn Production Cycles C R O P C A L E N D A R F O R M E X IC O C R O P C A L E N D A R F O R U S A N O R T H W E S T E R N M E X IC O ( % o f p ro d u c tio n ) M O S T O F U S A H A R V E S T P L A N T P L A N T T A S S /S IL K H A R V E S T J A N F E B M A R APR M A Y J U N J U L A U G SEP O C T N O V D E C J A N F E B M A R APR M A Y J U N J U L A U G SEP O C T N O V D E C S u m m e r p la n te d c o rn a c c o u n ts fo r a b o u t p e rc e n t o f to ta l production. A dd 1-2 m onths to the above crop calender for corn g ro w n in th e Y u c a ta n P e n in s u la C R O P C A L E N D A R F O R R E P U B L IC O F S O U T H A F R IC A R E S T O F M E X IC O ( % o f p ro d u c tio n ) M O S T O F S O U T H A F R IC A P L A N T S IL K H A R V E S T T A S S /S IL K H A R V E S T P L A N T J A N F E B M A R APR M A Y J U N J U L A U G SEP O C T N O V D E C J A N F E B M A R APR M A Y J U N J U L A U G SEP O C T N O V D E C S o u rc e : U S D A Market Prices as of July 18th, 2013 Spot Price Price changes relative to: Week Ago Month Ago Year Ago CBOT No.2 Yellow Futures $ 5.41 $ (1.76) -25% $ (1.32) -20% $ (2.54) -32% White Corn CIF Gulf $ 6.71 $ (0.71) -10% $ (0.86) -11% $ (3.57) -35% White Corn FOB Lower Ohio $ 6.21 $ (0.70) -10% $ (0.87) -12% $ (3.39) -35% White Corn Cash Prices White Corn Premiums ORVILLE FISHER WHITE CORN NEWSLETTER July,

5 White Corn Cash Prices White Corn Premiums December 2013 Corn Futures Contract Gulf Premiums White corn premiums CIF US Gulf for nearby shipment are nominally offered at $1.30/bu. over ($51/mt) over the CBOT September futures contract. This is approximately at $0.30/bu. ($12/mt) premium over the CIF gulf yellow cash bid for the respective time period. ORVILLE FISHER WHITE CORN NEWSLETTER July,

6 2013 / 2014 New Crop Planting Intentions For the upcoming 2013/14 crop year, total white corn planted area nationally is estimated at 736,464 or up 1% over last years planted acreage. The 2013/14 harvested acreage is expected to be just 1% above last year. While the planted and harvested areas are projected to remain flat, a return to more normalized yields should provide the U.S. with a substantially larger white corn crop. U.S. White Corn Planted Acreage History by State- (in bushels) Table 5 ORVILLE FISHER WHITE CORN NEWSLETTER July,

7 U.S. Supply and Demand The tables (Table 6a & 6b) below illustrates historical, and the current estimate for MY 13/14 new crop supply and demand situations. The tables are presented in both British and metric units. U.S. WHITE CORN SUPPLY & DEMAND British Units (acres and bushels) Table no. 6a Final Final Final Final Estimate July Est Planted Area 692, , , , , ,464 Harvested Area 686, , , , , ,735 Average Yield SUPPLY (bushels) Total Production 109,378, ,044, ,320, ,998,585 91,548, ,086,229 Beginning Stocks 10,152,696 5,295,302 14,854,234 12,870,804 4,419,389 6,667,989 Imports 250,000 1,700,000 Total Supply 119,531, ,340, ,174, ,119,389 97,667, ,754,218 DEMAND (bushels) Food 71,000,000 77,000,000 74,000,000 73,000,000 70,000,000 73,000,000 Feed/Industrial 5,000,000 16,000,000 5,000,000 3,200,000 7,000,000 7,000,000 Exports 38,236,000 31,486,000 39,304,000 33,500,000 14,000,000 34,000,000 Total Usage 114,236, ,486, ,304, ,700,000 91,000, ,000,000 Ending Stocks 5,295,302 14,854,234 12,870,804 4,419,389 6,667,989 11,754,218 % Ending Stocks/Use 4.6% 11.9% 10.9% 4.0% 7.3% 10.3% U.S. WHITE CORN SUPPLY & DEMAND Metric Units (hectare and tons) Table no. 6b Final Final Final Final Estimate July Est Planted Area 280, , , , , ,043 Harvested Area 277, , , , , ,082 Average Yield Yield in bu/ac SUPPLY (tons) Total Production 2,778,217 3,404,741 2,954,542 2,565,364 2,325,334 3,024,790 Beginning Stocks 257, , , , , ,367 Imports Total Supply 3,036,095 3,539,242 3,331,840 2,898,632 2,480,767 3,194,157 DEMAND (tons) Food 1,803,400 1,955,800 1,879,600 1,854,200 1,778,000 1,854,200 Feed/Industrial 127, , ,000 81, , ,800 Exports 971, , , , , ,600 Total Usage 2,901,594 3,161,944 3,004,922 2,786,380 2,311,400 2,895,600 Ending Stocks 134, , , , , ,557 % Ending Stocks/Use 4.6% 11.9% 10.9% 4.0% 7.3% 10.3% ORVILLE FISHER WHITE CORN NEWSLETTER July,

8 Comments about the 2013 / 2014 New Crop Supply & Demand (Marketing year starting September 2013 and ending August 2014) SUPPLY BEGINNING STOCKS - Carry forward supplies of 6.7 mill bushels will cover about 21 days of expected domestic and export demand. This is on the lower end of a comfortable and adequate supply, but is still the third highest level seen over the past 5+ years. PRODUCTION - As mentioned above harvested area is expected to grow slightly after last year s large planting acreage. We are currently assuming good growing conditions, crop quality, and a yield of 165 bushels/acre. This yield estimate reflects the impacts of the expanded plantings of GMO varieties and a continuation of the good growing conditions experienced so far. Production is forecast at million bushels, or a 30% increase from last year drought ridden crop. TOTAL SUPPLIES Expected to increase by 28.1 million bushels, or 29%, returning to normalized production levels. The large planted acreage coupled with a close to trend line yield create this increase in supplies. DEMAND FOOD - Domestic demand is forecasted to be up 3 million bushels from last year at 73 million bushels. EXPORTS - New crop exports are estimated at 34.0 million bushels. This is a 143% increase from last year. The initial rational for the return to a normalized export scenario include: 1.) The expected increase in production should make US white corn prices cheaper and make the US more competitive on a global scale 2.) Strong export programs to countries that normally import corn from South Africa. Very tight South African ending stocks projections will lead to fewer exports in 2013/14, driving countries to buy more from the US. FEED/ INDUSTRIAL - This is initially estimated at 7.0 million bushels. This category is the residual depository for excess corn and is influenced by production and exports. How much corn gets fed is strictly a function of the economics that dictate that additional white corn must move to the feed and yellow corn channels in order to ration down the burdensome supply situation. Typically in years with larger projected carryout stocks, as expected in 2013/2014, more white corn will be fed or ground for ethanol. Also, any quality issues will boost this feed number as well. ENDING STOCKS - Assuming normal weather through pollination and harvest, ending stocks will return to a more comfortable level, increasing 5.1 million bushels. This is a year-over-year addition of 76%. This represents a 10.3% ending stocks to use ratio, and provides some cushion in case of crop problems this year. Current Year /13 U.S. Exports Export inspections as of the end of June, are greatly below last year at this time. Decreased shipments to almost every country the US exports to is a direct result of the drought that devastated the US corn crop. Also, the world saw Mexico and South Africa recover from unfavorable growing conditions in the previous year, and produce adequate crops to satisfy the export demand that the US couldn t possibly meet. The US is currently on pace to meet our export forecast of 14.0 million bushels. ORVILLE FISHER WHITE CORN NEWSLETTER July,

9 U.S. White Corn Exports (In 000 bushels) Table 7a - Source: USDA U.S. White Corn Exports by Destination 000 Bushels 08/09 09/10 10/11 11/12 12/13 YTD COLOMBIA COSTA RICA EL SALVADOR GUATEMALA HONDURAS JAPAN JORDAN KAZAKHSTAN KENYA KOREA REP MEXICO NICARAGUA PHILIPPINES PORTUGAL ITALY SINGAPORE TOTAL U.S. White Corn Exports (In 000 mt s) Table 7b - Source: USDA U.S. White Corn Exports by Destination 000 Metric Tons 08/09 09/10 10/11 11/12 12/13 YTD COLOMBIA COSTA RICA EL SALVADOR GUATEMALA HONDURAS JAPAN JORDAN KAZAKHSTAN KENYA KOREA REP MEXICO NICARAGUA PHILIPPINES PORTUGAL ITALY SINGAPORE TOTAL ORVILLE FISHER WHITE CORN NEWSLETTER July,

10 Thousand Metric Tonnes Million Bushels Cumulative U.S. White Corn Exports Million Bushels 5 Year Range 12/13 YTD 10/11 11/12 1,200 Cumulative U.S. White Corn Exports Thousand Metric Tonnes 1, Year Range 12/13 YTD 10/11 11/12 ORVILLE FISHER WHITE CORN NEWSLETTER July,

11 Mexico Maize Situation FAS/USDA/ GRM Summary: The marketing year 2013/14 corn production estimate is expected to increase by 500,000 metric tons (MT) to 22.0 MMT as a result of favorable weather conditions, higher yields, and higher than previously estimated planted area. Production: The Post/New MY 2013/14 corn production forecast is 22.0 million metric tons (MMT), with an estimated 6.9 million hectares (ha) of harvested area. This increase in harvested acreage can mainly be attributed to 3 factors: Return to more normal weather patterns, A new provision that growers are only eligible to receive subsidies based on actual production, instead of land ownership as it used to be, And a Decree to end hunger in Mexico that hints at the government providing support to small farmers to incentivize them to plant more plots of land. Despite the optimistic perspective for commodity prices for MY 2013/14, both private and official sources agreed that a huge expansion of the planted area of corn or other basic grains, such as sorghum is unlikely. They stated Mexico s area to be cultivated has practically reached its limits. Since land restraints will limit large expansion, the current cultivated land needs to become more productive. The most important challenge in increasing productivity stems from the high degree of land fragmentation. 77 percent of Mexico s rural property is in the hands of farmers with less than five hectares and have no access to improved seeds, fertilizers, financial credit and marketing. Other structural problems include transportation, storage, and marketing, which continue to be sources of unnecessary high costs and bottlenecks in the Mexican corn sector. Mexico is the fifth largest corn producing country in the world, and white corn accounts for 67 percent of total production. Corn continues to be produced in all regions of Mexico in a wide range of agro-climatically diverse conditions by growers who differ in resource endowments, managerial structures and technical skills. Approximately 70 percent of the total production comes from eight states: Chiapas, Guerrero, Jalisco, Mexico, Michoacán, Puebla, Sinaloa and Veracruz. ORVILLE FISHER WHITE CORN NEWSLETTER July,

12 The average yield for the MY 2013/14 corn crop in Mexico is forecast at 3.2 MT/ha, assuming normal weather conditions. However, yields continue to vary significantly throughout the country, depending in large part on the level of technology used. For example, Sonora and Sinaloa have yields similar to those obtained on average in the United States for both white and yellow corn due to the advanced technology used by the growers of these states. The average yield for the MY 2012/13 corn crop in Mexico is expected at 3.1 MT/ha. Consumption: The Post/New MY 2013/14 total corn consumption is forecast at 29.7 MMT, a 2.8 percent increase over last year. This should be driven primarily by the population growth (1.08 percent) and the relatively strong demand by the feed industry. The total corn consumption estimate for MY 2012/13 has been lowered from the USDA/Official estimate based on high international corn prices causing a rationing of feed and residual use corn demand resulting in a strong shift to sorghum use in the feed ration. Corn continues to be the most important staple crop in Mexico, with consumption of corn and tortillas accounting on average 7 percent of Mexicans family budget. It is still the most important component of the Mexican diet and has a very important place in Mexican food traditions. Trade: The Post/New total corn import forecast for MY2013/14 is expected to increase only 1.3 percent compared to MY2012/13, to 7.8 MMT, in order to rebuild stocks. Also, in MY2013/14, Mexico is forecast to export approximately 150,000 MT to Venezuela and other Central America countries mainly due to attractive international prices as well as an increase in domestic production. The Post/New corn import estimate for MY2012/13 has been revised downward from USDA/Official estimate to 7.7 MMT based on private traders information and preliminary official The private traders stated Mexican feed grains importers have opted to import higher levels of sorghum instead of feed corn, as the price difference has been favorable to sorghum in the last few months. Similarly, the Post/New total corn import estimates for MY 2012/13 have been revised downward from USDA/ official estimate. Stocks: Post/New MY2013/14 ending stocks are forecast to increase to 1.4 MMT, due to an increase in domestic production and imports. The Post/New ending stocks estimate for MY 2012/13 is lower than the USDA/Official estimate (1.325 MMT) as a result of lower imports than previously forecast. Also, the Post/New ending stocks for MY 2011/12 has been revised downward from USDA/Official estimate due to lower than previously estimated imports. Please find below the most current Supply and Demand situation for Mexico. These figures are a few months old and we expected to be able to officially update within the next month. ORVILLE FISHER WHITE CORN NEWSLETTER July,

13 MEXICAN SUPPLY & DEMAND TABLE (WHITE & YELLOW) Metric units (Hectares and 000 MT) (Source: USDA Foreign Agriculture Service / GRM) Marketing Year Estimate Projected October - September 08/09 09/10 10/11 11/12 12/13 13/14 Harvested Area 7,318 6,280 7,020 6,070 6,830 6,900 Yield SUPPLY (000 MT) Beginning Stocks 4,131 3,559 1,389 1,112 1,025 1,325 Production 24,226 20,374 21,058 18,726 21,500 22,000 Total MY. Imports 7,764 8,298 7,934 10,881 7,700 7,800 Oct-Sep Import U.S. Total Supply 36,121 32,231 30,381 30,719 30,225 31,125 DEMAND (000 MT) Feed Use 16,400 14,200 13,400 13,200 12,600 13,000 Milling/Food/Other 16,000 16,000 15,800 15,800 16,200 16,550 Exports Total Use 32,562 30,842 29,177 29,594 28,900 29,700 Ending Stocks 3,559 1,389 1,112 1,025 1,325 1,425 % Ending Stocks / Use 10.9% 4.5% 3.8% 3.5% 4.6% 4.8% Table 8a Source FAS/USDA MEXICAN SUPPLY & DEMAND TABLE (WHITE & YELLOW) British Units (Acres and 000 Bushels) Marketing Year Estimate Projected October - September 08/09 09/10 10/11 11/12 12/13 13/14 Harvested Area 18,083 15,518 17,346 14,999 16,877 17,050 Yield SUPPLY (mil. bushels) Beginning Stocks Production Total MY. Imports Oct-Sep Import U.S. Total Supply 1,422 1,269 1,196 1,209 1,190 1,225 DEMAND (mil. bushels) Feed Use Milling/Food/Other Exports Total Use 1,282 1,214 1,149 1,165 1,138 1,169 Ending Stocks % Ending Stocks / Use 10.9% 4.5% 4.1% 3.8% 4.6% 4.8% Table 8b Source FAS/USDA ORVILLE FISHER WHITE CORN NEWSLETTER July,

14 Republic Of South Africa Maize Situation-/ FAS/ USDA C R O P C A L E N D A R F O R R E P U B L IC O F S O U T H A F R IC A M O S T O F S O U T H A F R IC A T A S S /S IL K H A R V E S T P L A N T J A N F E B M A R APR M A Y J U N J U L A U G SEP O C T N O V D E C Summary: A mid-season drought hit the Northwest and Free State Provinces in February and harshly affected summer crops. As a result, the CEC again adjusted its estimate for South Africa s 2013/14 commercial white corn crop downwards in June by another 140,000 tons to 5.9 million tons. This represents a 14.7% decline from the 2012/13 MY, or 1 million tons. Production: According to the CEC, commercial farmers planted 1.62 million hectares of white corn in 2013/14, one percent less than in 2012/13. The fifth production estimate, for white corn by commercial farmers for 2013/14, estimated the commercial corn crop at 5.9 million tons. The mid-season drought that hit the Northwest and Free State Provinces harshly affected the summer crops, and reduced the production estimate from 6.7 million tons. The impact of the drought has also been reflected in a relatively sharp increase in the domestic corn prices since the end of February. While the eastern side (primarily yellow corn) of the corn producing area of South Africa received enough rain to expect a good crop, the western side (primarily white corn) happened to be where the drought was the worst. Consumption: The demand for white corn for human consumption and animal feed has declined the past three years, due to relatively high corn prices and slow economic growth. South Africa s economy is expected to grow by less than three percent in 2013 and 2014 as labor unrest, financial uncertainties and prospects of slower global economic recovery will impact negatively on economic growth. The Rand also depreciated against major currencies the past year and expectations are that this will continue through 2013, which will impact the price of corn. For these reasons, CEC estimates that the commercial demand for white corn for human consumption and animal feed in 2013/14 will decline to approximately 4.9 million tons from 5.0 million tons in 2012/13. This means total annual commercial white corn demand of 6.0 million tons in 2013/14 will be down 10.5% and 18.7% from 2012/13 and 2011/12, respectively. Trade: Despite the drought in the west, South Africa will continue to be a net exporter of corn in 2013/14. With an estimated white corn crop of 5.9 million tons, CEC estimates that South Africa will be able to export about 965 thousand tons in 2013/14. It is estimated that South Africa exported 1.5 million tons of white corn in 2012/13. Please find below the most recent White Maize Supply and Demand situation. A smaller than normal carry-in and a greatly reduced yield, due to drought, in 2013/14 caused ending stocks to decline to their lowest levels in more than five years. ORVILLE FISHER WHITE CORN NEWSLETTER July,

15 REPUBLIC OF SOUTH AFRICA WHITE MAIZE SUPPLY AND DEMAND BALANCE SHEET (In metric tons) (Source: USDA Foreign Agriculture Service / CEC / GRM CEC CEC CEC CEC/FAS CEC/FAS CEC/FAS Marketing Year: Final Final Final Final Actual Estimate May - April MY 08/09 MY 09/10 MY 10/11 MY 11/12 MY 12/13 MY 13/14 Harvested Area (000 hect) Yield (mt/hect.) SUPPLY (in 000 mt) Carry-in ,362 1, Production Imports Retention / Early Deliveries Total Supply 7,833 7,547 8,925 7,865 7,431 6,469 DEMAND (in 000 mt) Milling / Seed 4, Feed / Gristing Residual Exports 1, Total Demand 7,071 6,185 7,316 7,347 6,674 5,975 STOCKS 762 1,362 1, % Stock/use 10.8% 22.0% 22.0% 7.1% 11.3% 8.3% Source: FAS/ CEC/ private industry REPUBLIC OF SOUTH AFRICA WHITE MAIZE SUPPLY AND DEMAND BALANCE SHEET (In US units) CEC CEC CEC CEC/FAS CEC/FAS CEC/FAS Marketing Year: Final Final Final Final Actual Estimate May - April MY 08/09 MY 09/10 MY 10/11 MY 11/12 MY 12/13 MY 13/14 Harvested Area (mill acres) Yield (bu/acre.) SUPPLY (in mill bu's) Carry-in Production Imports Retention / Early Deliveries Total Supply DEMAND (in 000 mill bu's) Milling / Seed Feed Residual Exports Total Demand STOCKS ( mill bu's) % Stock/use 10.8% 22.0% 22.0% 7.1% 11.3% 8.3% Source: FAS/ CEC/ private industry ORVILLE FISHER WHITE CORN NEWSLETTER July,

16 Global Risk Management is a company based out of the Twin Cities, Minnesota, which focuses on agricultural commodity price risk management, purchasing services, financial risk assessment, and consulting services. Our clients include growers, seed companies, processors, government agencies, packaged food companies, and the fast-food industry. If you are interested in our services, please go to for further information, or call us at ORVILLE FISHER WHITE CORN NEWSLETTER July,