Commodity prices more sensitive in tight market

CAMBRIDGE, Md. — With tight supplies in the U.S. and world corn market, commodity prices this year will be very sensitive to any worldwide production issues, a Perdue AgriBusiness official told farmers recently.
Tim Frump, vice president of risk management and soy merchandising for Perdue AgriBusiness, spoke to Dorchester County farmers at the revived Ag Appreciation Luncheon, sponsored by Queenstown Bank of Maryland, which opened its newest branch in Cambridge in October.
Hurt by hot and dry weather, Frump said Argentina’s corn crop is at lease 15 percent below its initial forecast and the soybean crop’s decline is at least 30 percent below what was initially forecast.
The USDA’s February soybean estimate was 41 million metric tonnes but some in the industry think that’s still 10 million metric tonnes too high.
“This has major implications in world soybean and product supplies,” he said.
Conversely, Brazil is projected to have a record safrinha or second corn crop and disruption in that production could have global consequences.
“The world really needs that corn,” Frump said.
Frump said analysts are expecting USDA’s planting intentions report on March 31 to put corn acres at 91 to 93 million. At trend line yields, the United States could produce a 15 billion bushel crop, which would be only the third time in history to happen.
On the soybean side, Frump said he sees a “tremendous growth ahead” in renewable diesel using soybean oil.
A Low Carbon Fuel Standard (LCFS) 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.
Renewable diesel is produced through a process called hydrotreating, similar to a traditional oil refinery operation.
It burns cleaner than traditional biodiesel, which is a blend of renewable fuels and petroleum-based diesel. Frump said bio-diesel production has “flatlined,” and may start to drop and renewable diesel is “the new kid on the block.”
Renewable diesel production capacity nearly doubled, from 971 million gallons per year in May 2021 to 1.92 billion gallons in May 2022, according to the U.S. Energy Information Administration.
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.
Frump said analysts are forecasting USDA’s planting intentions survey on March 31 to place soybean acres in the 87 million to 89 million acre range.
Nearly 91 million acres of soybeans will be needed to support projected U.S. soybean oil crush demand, Joe Lardy, CHS research analyst said in February.
The United States has only planted more than 90 million acres of soybeans one time, in 2017.
“That certainly creates a lot of discussion about food versus fuel,” Frump told the farmers. “It’s certainly creating new markets for your soybeans.”