Frump says U.S. a wild card in global deck

If production falters in Brazil and the United States this year, Tim Frump, vice president of risk management and soy merchandising for Perdue AgriBusiness, said tight supplies could remain in the world corn and soybean market. (Photo by Sean Clougherty)

EASTON, Md. — With commodity crop production fairly known in Brazil and Argentina, the United States’ planting progress and ensuing crop is the current wild card in the markets, a Perdue AgriBusiness official said last week.
Tim Frump, vice president of risk management and soy merchandising for Perdue AgriBusiness, spoke recently at the Talbot County Free Library on April 3.
The presentation was part of the spring speaker series presented by the Talbot County Department of Economic Development and Tourism in partnership with the library.
Argentina has been very dry and its corn and soybean crop forecasts have been repeatedly downgraded approaching harvest.
In October, USDA forecast Argentina’s corn crop at 55 million metric tonnes and its soybean production at 51 million metric tonnes, but with a bad growing season, the agency’s March forecast was reduced to 40 mmt and 33 mmt, respectively.
“I can tell you since that time, I’ve heard lower numbers,” Frump said.
Frump said the anticipated poor soybean crop is likely to push Argentina off its status as the top exporter of soybean meal and oil.
“It puts a lot of pressure particularly on Brazil and the United States to pick up that slack,” Frump said.
Brazil, on the other hand, is projecting a record corn crop and a 21-percent increase in soybeans compared to the previous cycle.
Overall, analysts said the South American soybean production still is expected to exceed the previous year, but to a lesser extent than initially thought.
In the United States, the March 31 USDA planting intentions report showed producers intend to plant 92 million acres of corn this year, up 4 percent from last year.
In soybeans, the report showed farmers intend to plant 87.5 million acres in 2023, up slightly from last year.
At trend line yields, Frump said, U.S. famers could produce record corn and soybean crops.
“The prospects are good if we get those kinds of planting, but the market is going to be watching Brazil very, very closely,” Frump said.
An area to watch in U.S. planting progress is the Northern Plains, which has had historically high snow fall this winter and that could translate into flooding that delays or prevents many growers from planting their crop.
“We’ve already got real tight supplies in corn,” Frump said. “Prevent plant could be a real problem.”
Showing a chart of historical prices, Frump pointed to the few times prices challenged $7 per bushel in corn and $15 per bushel in soybeans, while noting that the market generally can’t sustain those prices..
“We’ve had a few spikes, but you can see it’s pretty fast and pretty furious and generally doesn’t last for very long.”
Wheat price is generally tied to corn and Frump said even with the war in Ukraine, world wheat stocks are not as tight as corn and he expects more wheat will be blended into feed rations for cattle and hog diets.
Frump offered three month futures price ranges for key farm commodities: $5.75 to $7.50 for corn; $13.75 to $16.50 for soybeans; and $6.50 to $8 for wheat.
He added those prices don’t take into account effects from severe weather events, further macroeconomic issues or any new global military conflicts.
While an overall good South American soybean crop and the potential for record production in the United States could negatively impact prices, Frump said long-term soybean prices should benefit from tremendous growth in renewable diesel production and demand for soybean oil.
A Low Carbon Fuel Standard has been enacted in three states — California, Oregon and Washington — and other states are considering similar legislation and standards.
To be considered renewable, a fuel must be produced from non-fossil feedstock, such as plants, animal fats or processing waste or byproducts.
Currently, soybean oil makes up about 47 percent of the feedstocks for renewable diesel.
Frump said the production capacity for renewable diesel is expected to nearly double in the next three years, adding more than 600 million bushels in new demand for soybeans in that time frame.