Commodity Insider May 31, 2017

CROPS OK DEPENDING WHERE YOU ARE 

It's still a mixed bag out there on corn and beans. Overall, planting and emergence is close to average nationally, but there are parts of IL, IA, IN which have been wet and cold long enough to force a number of replants. Looking for a warm up over the next few weeks to help get the crop moving along a little faster.

 Source: USDA

Source: USDA

RECORD TURKEY PRODUCTION

Urner Barry says 2016 turkey production in US fell just 4% short of the record set in 2008. This year is tracking well also according to the USDA. The ready-to-cook (RTC) turkey slaughter estimate for 2017 is 6.12 billion lb., just below the 2008 record of 6.2 billion lb. The big difference is weight. We are slaughtering fewer turkeys but at higher weights. The 2008 average YTD was 29.76 lb compared to 31.95 lb this year so far.

AUSTRALIA CHASING CHINESE PORK MARKETS

Australian pork producers fighting increased lower cost imports are countering by chasing niches markets in China according to The Australian. Australia imports 171,000 tonnes of frozen processed pork products valued at $658 million annually, accounting for 70 per cent of all bacon and about 45 per cent of pork consumed locally.Being on the front foot preparing for change is a credo Queensland-based producers Aaron and Scott Scheid went to China last year to look at opportunities for high-quality pork. “We had to do a better job branding our product, having a strong online and social media presence and telling the story behind the brand, about our pig farms here at Allora and Bell that will appeal to high-end Chinese consumers,” Mr Scheid said. “Without those things, there’s probably no potential to get to the consumer in China; they produce a lot of their own pork but we still think there will be opportunities there at the top end for premium Australian pork if we do it right.” The Scheids have started exporting to Hong Kong and will move to mainland China as soon as fresh pork exports to China are formally approved — entry with low tariffs is now covered by the China-Australia Free-Trade Agreement 

DEALS

  • Swiss commodity giant Glencore is taking a run at U.S. grain trader Bunge Ltd. but it make take a while for the deal to get put together and will likely face government scrutiny on both sides of the pond. Glencore bought Canadian grain merchant Viterra Inc. for $4.8 billion in 2012
    It is already one of the world’s two biggest wheat traders, handling 18% of the world’s seaborne trade, and is one of the top three in Russia, Canada, Australia and the E.U. 
  • Alltech continues to grow its feed manufacturing capacity with the purchase of Montana-based WestFeeds. The deal includes manufacturing plants in Billings and Great Falls as well as feed stores in in Billings, Dillon, Great Falls, Lewistown and Miles City.

 

Commodity Insider, May 18, 2017

CROP PROGRESS

Big gains in planting last week, thanks to ideal weather in the Midwest. Overall, corn and spring wheat are now slightly ahead of schedule and soybeans are right at average. The upper Midwest has had good follow up rains this week which has the corn "leaping out of the ground" as one observer described.  

 Source: USDA

Source: USDA

YIELD ESTIMATES

Gro Intelligence has created a new openly-available crop yield forecasting model. You can see it here. As of May 12, Gro was predicting a US corn yield of 167.85 bushels/acre, down from last year's final yield of 174 bu/acre. 

POSITIVE WEATHER OUTLOOK

Latest temperature and precipitation forecasts for summer are looking pretty sweet for the Corn Belt...

 Source:  NOAA

Source:  NOAA

 Source: NOAA

Source: NOAA

DEAL OF NOTE

  • Large consumer packaged goods company Church & Dwight has acquired Wisconsin-based bio-science startup Agro BioSciences Inc. for $75 million, plus an earnout of up to $25 million based on future performance. The owner of the Arm & Hammer brand wanted Agro BioSciences for its lab-based rapid development technology and hopes to bring more high-demand probiotic products for poultry, cattle and swine to market in a shorter period of time.

Contact us with comments, tips. dryder@lumenitix.com  

Commodity Insider, April 28, 2017

PLANTING PROGRESS

Corn planting accelerated and soybeans were off to a quick start last week. But there are still a lot of wet fields and parked planters in the Midwest. A cold snap is also creating concerns in the upper Midwest - although the late planting will limit any frost damage to emerging plants.

 Source: USDA

Source: USDA

SEED RELABELING

Farmers Business Network has had a strong response to its seed relabeling study, receiving almost 2,000 tag pictures from farmers purchasing seed for corn, soybeans, popcorn, alfalfa, cotton and sunflowers. FBN estimates that over 70% of its members plant seeds from brands that relabel some of their seeds. One variety is being sold by at least 9 brands and farmers are paying up to $60 more for the same seed sold in their region. 

CHINA'S BIG BIOTECH MOVE

A length article in Fortune puts the spotlight on China's big moves into biotech, including ChemChina’s planned $43 billion cash takeover of Syngenta. Author Geoff Colvin makes the case that China's history of famines is largely behind it.  The worst famine in human history occurred in China from 1959 to 1961 when an estimated 34 million people starved to death. Hundreds of millions of Chinese people today, including most of China’s top leaders, survived that famine and have a strong predilection to food security in government and corporate policy. They have plenty of cash now, and appear to be intent on securing China's future food supply by acquiring and controlling ag technology. It is all part of a global race to consolidate ag tech into a small group of giant multinationals, assuming the Dow/DuPont and Bayer/Monsanto hookups are completed. Beyond the business reasons for the purchase, the ChemChina/Syngenta deal says a lot about China's growing interest in investing in innovation and intellectual property. The country has not had a good track record supporting and investing in IP. Will the compelling goals for food security change that?

STUDY GIVES CLUES ON WOODY BREAST

A study at the University of Delaware sponsored by the US Poultry & Egg Assn. has provided more clues on the causes of Wooden Breast Disease (WBD) in broilers, a muscle-related disorder affecting up to 10% of all birds in some flocks. Researchers found the development of WBD is largely the result of damaged veins, characterized by inflammation of the veins and lipid deposition around the veins. This disruption of venous drainage and regional impairments of lipid metabolism precede the changes in the muscle tissue. The researchers studied broilers from day old to 49 days of age and found heavier birds from one week of age to the end of the experiment were more predisposed to the development of the disease compared to average size birds. They also found an early onset of WBD, which started as localized vasculitis (inflammation of vessels) of veins in the breast muscle tissue by one week of age. 

MYCOTOXIN LEVELS INCREASING

The latest survey from Biomin indicates increasing levels of mycotoxins in feedstuffs in most regions of the world in the first quarter of 2017. More than 14,000 analyses were conducted on 3,715 finished feed and raw commodity samples sourced from 54 countries, looking for aflatoxins (Afla), zearalenone (ZEN), deoxynivalenol (DON), fumonisins (FUM) T-2-toxin (T-2) and ochratoxin A (OTA). Biomin found a rise in mycotoxin contamination levels in corn, finished feed and soy. DON, detected in 80% of samples, is the most prevalent mycotoxin worldwide, followed by fumonisins (FUM), found in 71% of samples. Over three quarters of the samples contained two or more mycotoxins.

PRECISION FARMING DEAL

J.R. Simplot has hired Spensa Technologies to build its new Simplot Advisor Platform, a component of Simplot’s SmartFarm. The platform will collect and analyze digital data for zone management, scouting, trapping and imagery. Simplot crop advisors will use the data for their agronomy advice.  

As always, contact us with tips/news. Email: dryder@lumenitix.com  Twitter: @lumenitix

 

CI April 20, 2017

SEED PRICING

A new report from Farmers Business Network suggests significant differences in corn seed pricing by state. FBN compared pricing between 12 states, adjusted for discounts and impact of traits and treatments, and found a $70/bag or $30/acre spread in pricing for both DeKalb and Pioneer seed. Farmers in Illinois, Indiana, and Wisconsin are paying the most for DeKalb seed, while farmers in Mississippi and Iowa were paying the most for Pioneer. Seed is cheapest in North and South Dakota.  

PLANTING PROGRESS

Wet fields slowed planting last week. Only 6% of the corn is in the ground, well behind 12% last year at this time and 2012-16 average of 9%. Spring wheat and oats are still also behind.

 Source:  USDA

Source:  USDA

DAIRY WARS

Four U.S. dairy organizations are urging President Trump to strong-arm Canada into halting their Class 7 program which they say is going to put a number of US dairies out of business by robbing them of an export market for ultra-filtered milk. But it would seem that the issue is less Canadian protectionism and government-backed supply management and more low dairy prices globally caused by overproduction. In recent years the world market for high-fat products such as butter have increased but that has left a lot of excess protein. Both Canada and the US are struggling to get rid of it. It's also hard to empathize with the US when the milk-feed price ratio currently sits at levels well above 2015 and 2016 (see below).

 Source:  Brian Gould,  Agricultural and Applied Economics , UW Madison

Source:  Brian Gould, Agricultural and Applied Economics, UW Madison

SOUTH AFRICA'S STRUGGLES

Drought and high feed prices are still making life miserable for South African livestock producers. The high cost of production is forcing more food producers and wholesalers to import meat. USDA data shows US exported nearly 25 million lbs of chicken to South Africa in February, exceeding the record level attained in recent months. The U.S. is expected to reach its annual quota of around 145 million lbs well before the year end.

POTATO PROBLEMS IN JAPAN

Japanese potato-chip maker Calbee has had to cut production significantly as the country deals with the worst potato harvest in 34 years - a result of a series of storms that battered the Hokkaido farming region last summer. The shortage is causing panic buying of chips in stores and highly inflated pricing. Some flavors were recently selling on auction sites for up to $14 per bag.

TINY PAPER WINS PULTIZER TAKING ON AG

A tiny newspaper in Storm Lake, IA has won a Pulitzer Prize for taking a brave stance against big ag on nutrient run-off. The Storm Lake Times  is owned by the Cullen family and has a staff of 10. Art and John Cullen said they have lost a few friends and advertisers over their editorials but  believe they did the right thing. “We’re here to challenge people’s assumptions and I think that’s what every good newspaper should do,” Art said.

CHART OF THE DAY

Source:  HowMuch.net a cost information web site.

As always, contact us with tips/ideas:  dryder@lumenitix.com or DM on Twitter @lumenitix

CI April 15, 2017

OPENING SHOT

The March 30 USDA Hogs and Pigs Report did not show any expansion in sow numbers since December, despite speculation that it would in response to pork demand signals domestically and internationally. Total number of slaughter pigs is increasing, but that's more to do with good health and improved sow productivity. We are hearing about increasing challenges with mycoplasma hyosynoviae and hyorhinis in finishing pigs which can lead to a spike in late finishing mortality. But it's too early to know if it will be of significance to total pork supply numbers.

PLANTING PROGRESS

#Plant17 is trending on Twitter and planters are running hard in IL...

Even in North Dakota...

Meanwhile, in TX it's already knee-high...

The April 10 USDA reports indicate we are trailing 2016 and the four year (2012-16) average in spring wheat, and oats. Corn is right at average and sorghum is ahead, due largely to progress in Texas and Louisiana. 

 Source:  USDA

Source:  USDA

NEW DEMAND FOR SOYBEANS

More tuna may be raised on soybeans, thanks to some recent breakthroughs in fish nutrition funded by the Illinois Soybean Assn.  The research by Ichthus Unlimited tested various soy-based diets for use on bluefin tuna, one of the world's most sought-after fish. Bluefin are normally fed wild-caught sardines and average a feed conversion ratio (FCR) of 28:1. The new soybean-based diet decreases the FCR to 4:1 and decreases the amount of fishmeal and fish oil in feed by tenfold. One of the key advantages of soybean feed is that it floats, reducing waste significantly.

COMMODITY INDEXES A BAD PLAY LONG-TERM

Adopting a "buy-and-hold" strategy may work with a stock-based index, but it's definitely not working with commodity-based index funds. Witness the 5-year performance of the Bloomberg (top) and Dow Jones-UBS commodity funds. Likely a lot to do with increased volatility and difficulty in predicting market moves. 

As usual, we welcome feedback: dryder@lumenitix.com or DM on Twitter: @lumenitix

CI April 7, 2017

HELLO WORLD

Welcome to the first edition of Commodity Insider. We are committed to keeping you informed on things that are important to agriculture on both the supply and demand side. If you're a farmer, our hat is off to you - it's a tough business, full of risk and uncertainty. We'd like to help you make better decisions on how you manage and sell your crops and livestock. If you're one of the millions that service the ag industry or make money trading in it, welcome also. Our goal is to give you perspectives and insights which you may not get elsewhere. If you like what you see here, please subscribe and tell others about it. We also welcome feedback. Please email us if you have some local insight which others may benefit from.

crop outlook

Compared to 2016, US producers are planning to plant:

  • 4% less corn 
  • 7% more soybeans - now almost equal to total corn acres
  • 8% less wheat - lowest acreage since records 

US Acres Planted

Total planted (in ,000 acres) 2015, 2016; est. 2017 . Source: USDA/NASS

KEY FACTORS IMPACTING FORWARD PRICING

  • Delayed planting - excess moisture (see chart below) could delay access to fields, particularly in areas which get large shots of rain over the coming weeks.
  • Weather events elsewhere - excessive rain in

 

Livestock outlook

Not looking pretty for either cattle or hogs heading into the fall, taking current projected crush margins (futures market price less cost of animal, corn, and - for hogs - soybean meal). 

US Feeder Cattle

Forward 12 months profit/losses for cattle marketed ($/head). Source: Iowa State Univ.

US Wean-Finish Pigs

Forward 12 months profits/losses for pigs marketed ($/head) Source: Iowa State Univ.

KEY FACTORS IMPACTING FORWARD LIVESTOCK PROFITABILITY

  • Hog packing capacity is set to increase substantially over coming months with new plants coming on line in Sioux City, IA (Seaboard); Coldwater, MI (Clemens); and Eagle Grove, IA (Prestage). Each plant represents around $250MM investment and will be built with latest processing efficiencies. At this point owners of existing older, less-efficient plants are not planning to go away. Apparently they've crunched the numbers and figure there's enough pigs and enough margin to stay in the fray. One thing's certain: packer margins will get a lot slimmer and producer margins will only improve as packers chase pigs.  
  • Trade policy is wild card with uncertainty around how much the Trump administration will come down on the side of ag in negotiations with China, Canada, Mexico, and other big trading partners. This will be a significant test for the ag lobbyists. 

broiler weights

Broiler integrators are dealing with the woody breast issue by lowering slaughter weights. Average slaughter weights in the US this year are down from 6.38 lbs in January to 6.04 lbs in March - over 5% lower. That adds up to a lot of extra chicken meat that the big integrators haven't been able to sell to offset their overhead. The US Poultry & Egg Assn. has funded research to understand the root cause of woody breast, but it may take a while to get results. Meantime, a Norwegian outfit TOMRA has come up with a way to detect woody breast on a processing line using its QVision meat analyzing technology. But that only tackles the problem on the downstream side. The industry really needs to figure out how to prevent it occurring in the first place. Until then, expect chicken weights to stay down.

international deals

  • Ethiopia's Verde Beef Processing has secured $7.5MM in funding to help it build an export-focused beef operation. The plan is to export up to 130,000 carcasses/year from their 1,300 Ha feedlot. Says a lot about the continued high value of beef globally.
  • According to Bloomberg, US private equity giant KKR is making a bet on protein in SE Asia by investing $250MM in Vietnam's Masan Group, which includes a 7.5% stake in the Masan Nutri-Science meat production division. Masan paid $45MM for a 230,000-head pig operation last year and owns around a quarter of the state-owned Vietnam Meat Industries, the country’s largest meat packer. It plans to represent half of Vietnam’s animal feed market and 5 percent of the country’s meat market by 2020 with revenue of $4 billion and net profit of $650 million. 

We welcome tips and feedback.  Contact us via email: dryder@lumenitix.com or DM on Twitter @lumenitix