Food Business News - January 1, 2013 - 20

Market Insight

2013
Grains forecast higher, eggs and dairy mixed while sugar and cocoa may trend lower
Continued from Page 1 week, up about 6% for the year but well below record highs near $8.50 a bu set in August as the impact of the summer drought became better realized. High corn prices crimped demand, especially export sales, which for the marketing year to date in mid-December 2012 were lagging the same period in 2011 by 48%. A bit eerily, perhaps, prognosticators are forecasting sharply higher corn planted area in 2013 and a record large corn crop well above 14 billion bus, assuming a return to near normal yields and not unlike early forecasts of 14.79 billion bus for the 2012 crop, which was down 27% from those early forecasts. Whether the lingering effects of depleted soil moisture from the drought allows yields nearer trend in 2013 remains to be seen. Nearby soybean futures prices ended 2011 near $12 a bu compared with nearby contracts trading around $14.15 a bu last week, up nearly 18% but again well below the September highs near $18 a bu. Unlike corn, the high prices had little impact on demand for limited U.S. and global soybean supplies with marketing year-to-date export sales through mid-December running 31% ahead of the same period a year earlier. Greater impact is expected to come later in the first quarter of 2013 as the harvest of a forecast record-large crop begins in South America. Wheat futures prices (Kansas City hard red winter, Chicago soft red winter and Minneapolis hard red spring) were trading near 5-month lows last week, also the victim of limited foreign demand due to strong U.S. prices, which were in part pulled higher earlier in the summer by soaring corn and soybean values. Nearby March hard red winter wheat futures were trading near $8.20 a bu last week, up 14% from a year earlier, soft red futures near $7.70 a bu, up 18%, and hard spring futures near $8.65 a bu, up 2%. Unlike corn and soybean futures in which nearby futures contracts were at a premium to deferred months due to expected larger 2013 crops of both, wheat futures prices were at a more typical carry (deferred contracts higher than nearby). Significant drought currently across much of the hard red winter wheat growing region of the Plains states has been the major supporting factor for new crop wheat futures, although it remains to be seen how winter and early spring moisture eventually will impact the crop. Perhaps the biggest news in wheat was the sale of the 136-year-old Kansas City Board of Trade to the CME Group late in the year, although most expect all-electronic hard red winter wheat trading volume may be bolstered as a result. Unaffected by the drought were sugar and cocoa powder prices, which at the end of 2012 were down about 40% and 20%, respectively, from a year earlier. For sugar, ample domestic and foreign supplies (especially Mexico) pressured prices throughout 2012 with current Midwest beet sugar prices at 4½-year lows around 31c a lb f.o.b. Users already have most of their 2013 sugar needs covered, and beet sugar for 2014 has been offered around 30c a lb, suggesting nearly flat sugar prices over the next two years. Cocoa powder prices ended

commodity outlook
2012 at three-year lows, due in part to weak chocolate demand in top-consuming Europe tied to continued weak economic conditions, and uncertainty about demand in the United States. Nearly flat cocoa bean futures prices from nearby through 2014 contracts suggest little upside to cocoa powder prices, as does buyers’ slow off-take of already purchased supply in some cases and their hesitancy to book forward coverage aggressively. Prices for egg and egg products and dairy products ended 2012 mixed compared with 2011, with egg supplies heavy

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January 1, 2013
Food Business News - January 1, 2013

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