AFBF American Farm Bureau Federation : Bearish Outlook for U.S. Crop Prices

ORLANDO, FLORIDA, January 11, 2016-U.S. grain price outlook and crop demand for 2016-2017 is bearish, according to Alan Brugler of Brugler Marketing and Management, LLC.

Brugler spoke to attendees during AFBF's 97th Annual Convention and IDEAg Trade Show about global crop trends in production and demand for the upcoming year.

Brugler said he looks for better indications of what could come after the final crop production numbers are released this Tuesday, and when there's a better grasp on the forecasted summer weather conditions. He also said to keep in mind that there is typically a 4 percent yield drop after an El Nino onset.

December corn hit a three-year low, but there is no consistent pattern for 2016-2017 based on past USDA averages, said Brugler. However, U.S. prices will be competitive with Brazil because outside of the U.S. and China, corn stocks are getting tighter.

'Brazil responded to the low numbers we had a few years ago and their stocks have come down. This is a positive, because it provides export opportunity,' said Brugler.

Ethanol production is also picking up, Brugler said. We are using a lot of corn for ethanol right now.

'Ethanol was basically a free market in 2015, and the requirement put out this fall was 500 million gallons more than proposed,' said Brugler.

He also touched on the fact that China has implemented an ethanol mandate to help clean up the air, but they don't have enough ethanol production yet to supply that demand.

The nine-year wheat cycle low is not due until 2017, but the U.S. is currently losing the battle on exporting wheat. One of the competitive problems is that we have been on a long-term decline since 2000. Russia is also working the wheat market really hard right now, and they have a price advantage, said Brugler.

'The potential 2016-2017 ending stocks for wheat could be upwards of 1.1 billion. This is a problem and we need to figure out how to use it fast,' Brugler said. 'The bottom line is, there is plenty of wheat available if you're a country that needs to bring it in.'

Soybeans have been on a decline since 2012. The weekly soybean chart foresees a big move ahead, but it doesn't say which way. World use was better than expected, a pattern that has been present for several years now, and prices may be friendlier, said Brugler.

'The soybean outlook price is holding,' said Brugler, 'but the market is oversold.'

Brugler remarked during the presentation, 'prices sit on a three-legged stool: fundamentals, technical and asset allocation.'

Connecting With American Farm Bureau
Follow us on Twitter (@FarmBureau), Facebook and Instagram.

-30-

Contacts:

Will Rodger Kari Barbic
[phone] [phone]
[e-mail] [e-mail]