Prices for grains, soybeans and peanuts have limited upside potential this year due to ample supplies and the strong dollar, speakers said Feb. 10 at the International Sweetener Colloquium sponsored by the International Dairy Foods Association.
After “very positive” returns for the past several years, 2014 was a transition year and 2015 will be “negative all the way through,” said Steve Nicholson, vice-president, food and agribusiness research and advisory, Rabo AgriFinance, citing data for corn and soybeans from Iowa State University and Rabobank.
“Buyers now have an opportunity to look at lower prices,” Mr. Nicholson said. “But don’t get complacent. The markets are going to be volatile.” He noted that farmers were holding large amounts of corn, and that “when they are ready to sell, you better be ready to buy.”
The value of the dollar will remain a concern and will continue to rise, Mr. Nicholson predicted. The dollar has been near six-year highs recently. A strong dollar makes U.S. products more expensive for foreign buyers, while making dollar-denominated products more profitable for other countries to export because they get more local currency in return.
Crude oil prices have “found the bottom” with solid support at $45 a barrel, Mr. Nicholson said.
Forecasts for 89.2 million acres of corn and 86.3 acres of soybeans to be planted in 2015 are “starting to shift back to corn,” Mr. Nicholson said. Corn plantings over 90 million acres should be considered bearish and under 88 million acres should be bullish, he added.
There’s not a lot of up or down side to corn, Mr. Nicholson said, adding that “there’s not much on the demand side that looks good.” He expects 2015 corn prices paid to farmers to average $3.60 a bu in 2014-15 (the current year), slightly below the U.S. Department of Agriculture’s projection of $3.65 a bu and down from $4.46 a bu in 2013-14. He sees only modest improvement in 2015-16 with an average of $3.75 a bu.
He said swing factors for corn prices included China’s corn imports and policies, U.S. corn used for ethanol as ethanol margins decline, 2015 planted acres and Brazilian corn production.
Mr. Nicholson expects prices paid to farmers for soybeans to average $9.75 a bu in 2014-15, well below the latest U.S.D.A. projection of $10.20 a bu and compared with $13 a bu in 2013-14. A key factor pressuring U.S. soybean prices will be another year of record production in South America, with Brazilian soybean output forecast at 94 million to 95 million tonnes and Argentine production at 56 million to 57 million tonnes (U.S.D.A. Feb. 10 projections were 94.5 million and 56 million tonnes, respectively). Good domestic and export demand for soybeans and soybean meal remain key bullish factors, as do strong crush margins and expansion of pork and poultry production, he said.
U.S. wheat prices will remain under pressure from following corn lower, disappointing U.S. exports, the strong dollar and ample global supplies, Mr. Nicholson said. Bullish factors for wheat include lower U.S. planted area, tight U.S. wheat stocks and the lack of good quality milling supply globally. Swing factors for wheat prices included uncertainty about Russian exports, dry conditions in the northern Plains and the condition of winter wheat as it comes out of dormancy, he said.
George Lovatt, president, Lovatt & Rushing, said he expected the strong government price support program for peanuts to encourage additional plantings in 2015, possibly pulling acres from corn, soybeans and cotton due to better returns for peanuts.
“There is tremendous incentive to plant peanuts over other crops,” Mr. Lovatt said, adding that returns for peanuts have the potential to “blow other crops out of the water.” He expects 2015 peanut planted acres “will be up substantially” from 2014. Prices for the 2015 crop (marketed from Aug. 1, 2015, through July 31, 2016) will be around 45c to 48c a lb, he predicted, with prices for the 2014 crop (now being marketed) currently above 50c a lb trending toward 2015 prices in time.