2015 will be a year of survival for crop operations

Last month USDA came out with a plethora of reports for grains. USDA estimated 2014 corn production at 14.216 billion bushels with a yield at 171 bushels per acre. Both numbers were down from the previous estimate last November. Early last fall, some analysts thought corn production could top 15 billion bushels with the yield climbing near 180 bushels. Ending stocks were reduced 121 million bushels to 1.877 billion bushels. Corn production eclipsed the record production year of 2013. The January reports included grain stocks as of December 1.

Corn stocks were higher than expected which provided a dampening affect on corn prices. In addition, many traders were disappointed that harvested corn acres were unchanged. For weeks and months leading up to this report, commodity trading funds had added to their already long corn positions. They had long pointed out that the corn acres number tabulated by FSA were less than expected, having a larger than normal discrepancy compared to the USDA corn acres number in the supply and demand table. They felt USDA would have little choice but to lower corn acres at least two million acres. That did not happen. USDA projections for U.S. winter wheat acres are 40.4 million acres, 2.1 million acres below trade expectations. However, world ending wheat stocks were two million tons higher than expected.

Soybean numbers were both positive and negative. However, the positive only pushed prices higher by nine cents moments after the report release when quarterly soybean stocks were less than expected. The gains lasted less than five minutes as the remainder of the numbers were digested. World ending stocks rose along with higher Brazil production. U.S. ending stocks were left unchanged at 410 million bushels. Traders were extremely disappointed that ending stocks were unchanged. That number played a major role in pushing the nearby March CBOT soybeans 36 cents lower on the close.

Could soybeans be setting up similar to corn last summer when it had declines of nearly $2 in less than six months? At a seminar I attended in Chicago last month, a rosy picture was not painted for soybean prices. Currently November CBOT soybeans are $9.75. One analyst thought November CBOT soybeans could fall to the $8 to $8.50 level. Another analyst was even more bearish in suggesting they could reach $7.25 to $7.50. Why the bearish thoughts? It seems a forgone conclusion U.S. soybean acres will again be record-setting in 2015. They are expected to increase 2 to 4 million acres.

The United States had record-setting soybean production in 2014. Another record-setting production year is in the cards for South America this spring. Record-setting production could be in the cards for the United States in 2015 without weather robbing issues this summer. With all of those records, you have the strong potential of 2015-16 U.S. soybean ending stocks near 650 million bushels. Current ending stocks are projected at 410 million bushels. Ending stocks for 2013-2014 were just 92 million bushels

Input costs for corn especially continue to remain high. High corn profits per acre of years past are long past, just a fading rear view memory. Many producers will struggle just to break even producing corn in 2015. As a result, marginal corn yielding ground could instead be planted to soybeans in attempt to preserve farm profitability. This is not new news. Instead, this is the news headline: Survival. Producers will need to realize 2015 is a year when they will have to survive making a lot less money and for numerous producers to do the best they can to lose the smallest amount possible. They need to do this to continue farming and realize much stronger margins in upcoming years. Input costs will decline below current levels as the market realigns, just don’t expect sharply higher selling prices to be in the cards as the realignment takes place.

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