May 6, 2014 Volume 32, Issue 18 Additional articles can be found at: www.soybeansandcorn.com U.S. Corn Planting Remains Behind the Average Pace As of Sunday 29% of the 2014 U.S. corn crop had been planted compared to 11% last year and 42% for the five-year average. The cold and wet weather last week only allowed the planting to progress 13% during the week, but the planting pace should greatly accelerate this week given the improved weather forecast. The corn emergence was 7% compared to 3% last year and 13% average. The soybeans are 5% planted compared to an average of 11%. Of the 18 major corn producing states, 5 are ahead of average on corn planting and 13 are behind average. The furthest ahead of average are in Missouri (+12%) and Kansas (+6%) and the furthest behind average are Minnesota (-38%), Iowa (-27%), Ohio (-23%), Wisconsin (- 21%), Michigan (-20%), and North Dakota (-19%). If farmers make as much progress as expected this week, the corn could be 50% planted by next Monday. I am not overly concerned about the delayed corn planting in the central Corn Belt because now that the calendar has turned to May, all the farmers in the central Corn Belt will plant their corn as quickly as possible as soon as the conditions are dry enough to get in the fields. Even if the soil temperature remains a little cool, they will plant anyhow knowing that the soil temperatures will now warm up quickly. The soil temperatures in will warm quickly with the higher sun angle (64.5 degrees above the horizon at noon in Chicago on May 5th) in addition to the warmer southerly winds expected this week. The highest angle sun will occur on June 21 st when it will be 71.6 degrees above the horizon at noon in Chicago. While I am not too concerned about the central Corn Belt, I am concerned about the continuing delays in the northwestern Corn Belt where the soil temperatures are still very cool. The state report from North Dakota indicated that field work began May 4 th, but mostly in the southern counties. Zero percent of the anticipated corn has been planted in North Dakota compared to an average of 19%. There are reports of farmers in the state switching their corn to earlier maturing hybrids due to the late start. It is entirely possible that they may eventually switch some of their intended corn and spring wheat acreage to soybeans if the situation does not improve quickly. USDA s 2014 U.S. Total Acreage Numbers may be Too Small At the present time, it does not look like we will have as many prevent plant acres as last year and as a result; the total acreage pie currently being used by the USDA may be 1-2
May 6, 2014 2 million acres too small. The amount of prevent plant acres won t become clear until later in June, but for now, it doesn t look as bad as last year. If the overall acreage is too small, then the question becomes will farmers plant more corn and/or more soybeans than what was indicated in the March Prospective Planting Report. Currently, I would allocate more of the potential missing acres to soybeans than to corn due to the delayed start to corn planting and the continuing cool temperatures in the northern Corn Belt. Some of the intended corn acreage in the northwestern Corn Belt may not get planted (maybe 500,000 acres), but that may be compensated for by more corn being planted elsewhere (maybe 1,000,000 acres). Therefore, the 2014 U.S. corn acreage may end up a half a million acres greater than the 91.69 million acres indicated in the March report. For soybeans though, there is a distinct possibility that the acreage could surpass the 81.49 million acres indicated in the March report. The increased acreage could come from the overall larger acreage pie and the switching of some of the intended corn acreage and spring wheat acreage in the northern Corn Belt to additional soybean acreage. Currently, I would estimate that the 2014 U.S. soybean acreage might increase 1,000,000 acres above the March estimate. Even though the acreage estimates may be in flux, I think it is way too early to speculate about fluctuations in potential crop yields. I would continue to anticipate the 2014 U.S. corn yield at 163 to 165 bu/ac and the U.S. soybean yield at 44 to 45 bu/ac. Potential El Nino Could be Good News for the 2014 U.S. Corn Crop It looks more and more likely that at least a weak El Nino will be in place by summer and a potentially moderate El Nino will be in place by late summer or early fall. If that does in fact happen, we should expect the potential for below normal temperatures across the central and eastern Corn Belt during the summer months. If we do get below normal temperatures during the summer months, that would be very good news for the potential corn yields in the U.S. I think the most important take home lesson from the 2013 U.S. corn crop were the below normal temperatures that occurred during the month of July. The below normal temperatures were one of the factors that led to a nationwide corn yield of 158.8 bu/ac, which ended up being much better than what had been anticipated earlier in the summer. Any time the July temperatures are below normal, the corn pollination is generally very good and as a result, we should probably expect average to above average corn yields in the central Corn Belt. Amazon River Route Inaugurated for Brazilian Soybean Exports In recent years the question has repeatedly been asked as to when Brazil will start making significant progress on improving their inadequate infrastructure to move grain more efficiently to export markets. I think we can finally say that progress has been made and now there might be at least a small light at the end of the tunnel. After years of studies indicating that exporting grain out the Amazon River would be a much better option than exporting grain from ports in southern Brazil, significant progress is finally being made on this northern route, which one day will be a major export route for
May 6, 2014 3 Brazilian soybeans and corn. Last week, the first vessel loaded with grain from the Port of Vila do Conde set sail for Spain inaugurating the newest export facility in northern Brazil. The ports of Santos and Paranagua in southern Brazil will remain important export facilities, but the Port of Vila do Conde could be destined to become Brazil s major grain port in the decades to come. The newest facility at the Port of Vila do Conde was built by Bunge at the city of Barcarena, which is right next door to the much larger city of Belem located at the mouth of the Amazon River. Bunge s grain terminal has been named Terfron which stands for the Northern Frontier Port Terminal (Terminal Portuario Fronteira Norte). Soybeans exported from this port were produced in the state of Mato Grosso in central Brazil. The soybeans were then trucked north on highway BR-163 to the Port of Miritituba on the Tapajos River where they were loaded onto barges and transported to the Port of Vila do Conde near the mouth of the Amazon River. At that point they are loaded unto Panamax-size vessels (65,000 tons) destined for Europe and China (see map at the end of this article). The barging operation is a joint venture between Bunge and Amaggi called Unitapajos. In 2014 the joint venture will have 50 barges and two tug boats and that will increase to 90 barges and three tugs by 2015. Bunge s Terfron facility is expected to handle 2 million tons in 2014, 4 million tons in 2015, and 8 million tons by the year 2018. Eight million tons will be a significant milestone because that is how much was exported in 2013 from Bunge s facility at the Port of Santos in southern Brazil. Bunge is just one of many grain companies set to utilize this same Amazon River route to export grain. It is estimated that the Port of Vila do Conde could be Brazil s largest grain port by the year 2020 when an anticipated 22 million tons of grain will move through the port, surpassing the Port of Santos. Utilizing this northern route will reduce the time needed to ship grain to Europe by 20% and by 15% to China. The reduction in transportation costs is estimated to be approximately 34%, but that will be dependent on how much it costs to export grain out of southern Brazil. Bunge is just the first company to have all the facilities in place to utilize this Amazon River route. Seven other companies are currently in the process of constructing similar facilities along the route at an investment of over R$ 6.2 billion. The most expensive link in this entire system is the need to truck soybeans the first 1,000 kilometers from the fields of northern Mato Grosso to the Port of Miritituba on the Tapajos River. As a way to reduce this cost, the major grain companies in Brazil (ADM, Bunge, Cargill, Dreyfus, and Amaggi) are petitioning the federal government to construct a railroad from Sinop in northern Mato Grosso to the Port of Miritituba. If this railroad is built, grain would move by rail and barge through virtually the entire system, thus eliminating the need for trucking, which is the most expensive way to move grain. Total exports of soybeans and corn from Brazil are expected to double from the current 65 million tons to 110 million tons over the next decade and this northern route will be a critical factor in helping Brazil stay competitive in world grain markets. The huge increase in proposed
May 6, 2014 4 exports from Brazil also creates a tremendous challenge in upgrading their infrastructure fast enough to keep up with the proposed increase in production. Below is a map of the new northerly route for soybean exports from Brazil. The total distance from Sinop, Mato Grosso to the Port of Vila do Conde in the state of Para is approximately 2,500 kilometers. I am not sure which river channels the barges would use, so this distance may not be completely accurate. I have not personally been to the Port of Miritituba as yet because we are waiting for the asphalting of highway BR-163 to be completed. Once that is complete, we are planning on visiting the Port of Miritituba as well as the Port of Santarem and the Port of Vila do Conde.
May 6, 2014 5 At the bottom of the map you can see the city of Cuiaba, which is the capital of Mato Grosso. From Cuiaba to Sinop is approximately 500 kilometers. If the state of Mato Grosso is divided into two smaller states, the city of Sinop would probably become the capital of the new state. American Investors Evaluating Corn-Based Ethanol in Mato Grosso A group of American investors led by Mathew Kruse met last week with the Director of Economic Development from the city of Lucas do Rio Verde in central Mato Grosso. The purpose of the meeting was to evaluate the municipality for the potential construction of a US$ 120 million corn-based ethanol production facility. The group is evaluating other municipalities as well and they have not set a timetable for their final decision. This is just the latest in a series of potential investments in Mato Grosso and Mato Grosso do Sul that could take advantage of the excess corn production in the region to produce ethanol. Virtually all the ethanol in Brazil is produced using sugarcane, but the recent surge in corn production is believed to have opened up an opportunity to utilize the corn to make a higher value product (ethanol) instead of paying excessive transportation costs to move the corn to end users or exporters in southern Brazil. The American ethanol producer Poet announced earlier this year that they were prepared to start construction on the first of four corn-based ethanol plants in the state of Mato Grosso do Sul. Two sugar mills in Mato Grosso have already been retrofitted to utilize corn or grain sorghum to produce ethanol during the 3-4 summer months (generally December through March) when sugarcane is not available. Currently, only a small percentage of the corn produced in Mato Grosso is consumed within the state and farmers are glad to see projects that will increase domestic consumption. Most of the corn that is moved out of the state does so with the federal government subsidizing part of the transportation costs. Brazilian Soybean Estimate Unchanged at 86.5 Million Tons The harvesting of the 2013/14 Brazilian soybean crop is nearly complete with only a few percent of the crop left to harvest in Rio Grande do Sul in southern Brazil and a little left to harvest in northeastern Brazil. The soybean harvest in Rio Grande do Sul should be done in about 10-15 days. What remain to be determined are the safrinha soybeans. The safrinha soybeans are filling pods and the crop will be harvested starting in late May. The harvest needs to be completed by June 15 th, which is the start of the 90-day soybean free period in most of Brazil. Technicians from the Ministry of Agriculture finally acknowledged that for the first time in the state s history, farmers in the state of Mato Grosso do Sul planted a significant amount of safrinha soybeans. They are estimating that 15,000 hectares of safrinha soybeans were planted in the state and the estimated yield of the safrinha soybeans is 1,800 kg/ha (26 bu/ac), which would be 39% less than the yield of 2,934 kg/ha (42.5 bu/ac) achieved with the first crop soybeans.
May 6, 2014 6 Since there is no historical data concerning safrinha soybean yields, I had estimated that the crop would yield 2,000 kg/ha or about 29 bu/ac, so it looks like we were fairly close. There have not been any estimates as yet from Conab as to the safrinha soybean acreage in Mato Grosso or the potential yield of the soybeans. Brazilian Farmers are slow Sellers of their 2014 Safrinha Corn The safrinha corn in Mato Grosso is developing satisfactorily at least for the time being, but farmers are worried about developing dryness. The rainfall started to diminish during the second half of April and the dry weather has continued into early May. The near term forecast for central Mato Grosso also looks dry as well. As of the end of April, 91% of the corn was pollinating or beyond, 8% was filling grain, and 1% was maturing. The farmers in Mato Grosso continue to be slow sellers of their anticipated 2013/14 corn production. The Mato Grosso Institute of Agricultural Economics (Imea) estimates that only 11.5% of the 2014 corn production in the state has been forward contracted compared to 17% last year at this time. The disparity between the two years is even greater than the percentages indicate when you consider that this year s production will be much smaller than last year. In absolute terms, the farmers in the state have sold 1.7 million tons of corn as compared to 3.8 million tons last year. In Mato Grosso 35% of this year s soybean acreage was followed by a second crop of corn compared to 46% last growing season. Imea estimates that the corn acreage in Mato Grosso declined 19% from 3.70 million hectares to 2.87 million. The yield is estimated at 85.4 sacks per hectare (5,127 kg/ha or 80 bu/ac) compared to 101.5 sacks per hectare last year (6,090 kg/ha or 93.7 bu/ac). The total production in the state is estimated at 15.23 million tons compared to 22.53 million tons in 2012/13. The uncertainty of the corn production and the expectation for higher prices in the future has kept farmers from selling much of their anticipated corn crop. Corn prices in Mato Grosso last week were R$ 15.40 per sack (approximately US$ 3.18 per bushel) for delivery in August and payment in September. Farmers are expecting that the smaller crop in Brazil and the expectation for reduced corn production in the U.S. will lead to stronger prices in the coming months. Parana is the second leading safrinha corn production state in Brazil and the corn in Parana is rated 93% good, 6% average, and 1% poor. As of the end of April, the corn was 26% in vegetative development, 42% pollinating, 30% filling grain, and 2% maturing. According to the Secretary of Agriculture in Parana, the average corn price in the state is now R$ 23.00 per sack (US$ 4.75 per bushel) compared to R$ 19.00 per sack in May of 2013 (approximately US$ 3.92 per bushel). Corn prices are expected to strengthen in Brazil as supplies of the smaller fullseason corn crop start to dwindle before the safrinha corn hits the market. The safrinha corn harvest in Mato Grosso will start at the end of May and peak in June. In Parana the harvest will also start in late May, but the peak will be later in July and August.
May 6, 2014 7 Brazil Corn Estimate Unchanged at 72.0 Million Tons After a couple of weeks of dryer weather in Brazil, rains once again moved into the southern states of Parana, Rio Grande do Sul and parts of Mato Grosso do Sul. The safrinha corn in Brazil is pollinating and filling grain and the crop is rated 90% or more as good to excellent. The most advanced corn now probably has enough soil moisture to finish the season with very good yields, but the later planted corn still has a way to go and dryer weather in Mato Grosso could still limit the yields somewhat. There is also the potential for frost that could occur in southern Brazil before the corn reaches maturity. My biggest concern right now would be continued dryness in Mato Grosso. Many areas have now been at least two weeks without significant rainfall and there is not much rain in the forecast. If it remains dry, it could impact the yield potential of the later planted corn in the state. The safrinha corn in Parana continues to be doing very well and more rainfall moved across the state over the last few days. Therefore, the 2013/14 Brazil corn estimate was left unchanged this week at 72.0 million tons and I have a neutral bias going forward. If Mato Grosso would get more rainfall over the next couple of weeks, then my estimate is probably too low. Conversely, if the dry season has actually taken hold and there is no more rain in the state, then a 72 million ton corn crop in Brazil might be too optimistic. Argentina Soybean Estimate Increased 0.5 mt to 54.0 million Argentine farmers made good progress on harvesting their soybeans which are now approximately 60% harvested. This is an advance of 14% in one week, but it is still about 9% slower than last year. In the core production regions, the crop is about 85% harvested or more. In the southern regions the crop is 20% to 40% harvested and in northern Argentina the crop is approximately 15% harvested. The Grain Exchange in Buenos Aires is now estimating that 730,000 hectares of soybeans will not be harvested due mainly to excess water. If verified, that would represent approximately 3.5% of the soybean acreage in Argentina. Soybean yields in Argentina continue to exceed expectations especially in the northern regions where the crop was planted late. The nationwide average yield is now running at 3,130 kg/ha (45.3 bu/ac). As so often happens with soybeans, ample moisture during pod filling can result in surprising good yields. The heavy rains that fell in Argentina during February and March caused some localized flooding, but in areas where it did not flood, the moisture was very beneficial for soybean crop. As a result, the 2013/14 Argentina soybean estimate was increased 0.5 million tons to 54.0 million and I have a neutral to slightly higher bias going forward. The surprise this year in Argentina continues to be the good yields from the late planted soybeans especially in northern Argentina.
May 6, 2014 8 Argentina Corn Estimate Unchanged at 23.5 Million Tons The corn harvest advanced slowly last week as farmers focused more on harvesting their soybeans. The corn crop is now approximately 27% harvested which is up only 2% for the week and it is 18% behind last year s progress. In the core production regions the corn is 60% to 70% harvested. In southern Argentina the corn is less than 30% harvested and it is about 10% harvested in northern Argentina. The nationwide average corn yield is now 7,420 kg/ha (114 bu/ac) and farmers in Argentina are very pleased with the yields from their late-planted corn. This now makes three years in a row that the later planted corn has done very well in Argentina. The 2013/14 Argentina corn estimate was left unchanged this week at 23.5 million tons and I have a neutral to slightly higher bias going forward. It s the later planted corn that might actually move the production number a little higher. 2013/14 South American Soybean Production Current 2012/13 Country Estimate Maximum Minimum Production million metric tons Brazil 86.5 88.0 85.0 82.0 Argentina 54.0 55.0 53.0 49.5 Paraguay 8.5 9.0 8.0 9.3 Bolivia 2.5 2.7 2.2 2.6 Uruguay 3.2 3.5 2.8 3.0 Total 154.7 158.2 151.0 146.4 2013/14 South American Corn Production Current 2012/13 Country Estimate Maximum Minimum Production million metric tons Brazil 72.0 75.0 69.0 81.0 Argentina 23.5 25.0 22.0 26.5 Paraguay 2.5 2.8 2.1 3.0 Bolivia 0.7 0.8 0.6 0.7 Uruguay 0.4 0.5 0.3 0.4 Total 99.1 104.1 94.0 111.6 2013/14 South American Growing Condition Ratings May 6, 2014 Prior Week Brazil safrinha corn 6-7 6-7 Argentina soybeans 5-6 5-6 Argentina corn 5 5
May 6, 2014 9 A rating of 1 means that the growing conditions are very detrimental, a rating of 5 equates to average conditions and a rating of 10 means that the growing conditions are ideal. Dryer Weather in Rondonopolis, Mato Grosso The last significant rainfall in Rondonopolis was April 11-12 when they received 1.4 inches of precipitation. Since then, there has only been 0.3 inches of rain during three light rainfall episodes. The near term forecast is calling for very little rainfall over the next two weeks. If that does turn out to be the case, then we could probably say that the dry season has begun and that there would only be a slight chance of significant rainfall going forward. Monthly Rainfall in Rondonopolis, Mato Grosso Total Rainfall Number of Days With Month in Inches Measurable Rain July 2013 0 0 August 2013 0 0 September 2013 0.8 1 October 2013 4.1 10 November 2013 3.8 13 December 2013 11.3 18 January 2014 6.5 21 February 2014 10.3 16 March 2014 13.9 18 April 2014 4.9 9 May 2014 (one week) 0 0 Michael Cordonnier Copyright 2014. This material is copyrighted and may not be reproduced or distributed, in whole or in part, without written permission. The Soybean And Corn Advisor is issued weekly and questions and comments can be directed to Dr. Michael Cordonnier, Soybean And Corn Advisor, Inc., and P.O. Box 86, Hinsdale, IL 60522 (630) 325-0192; FAX (312) 658-0071; email - soycorn@comcast.net. Projections and estimates are based on information, which is believed to be accurate. No representation is made that the estimates will, in fact, be realized. The Soybean And Corn Advisor, Inc., assumes no liability whatsoever for the use of this information.