Monthly Archives: August 2012

//August

Drought Ignites Battle over Corn Supplies; U.S. biofuel mandate pits ethanol refineries against meat producers

AUGUST 18, 2012
By: JOHN H. CUSHMAN JR., The International Herald Tribune

Three big intertwined but rival American agribusinesses – corn farmers, meat and poultry producers, and biofuel refineries – are in a political fight to protect their interests as a drought ravages corn producers and industrial consumers alike across the United States.
At issue is whether to suspend a five-year-old federal mandate requiring more ethanol content in gasoline each year, a policy that has diverted almost half of the domestic corn supply from animal feedlots to ethanol refineries, driven up corn prices and plantings, and created a desperate competition for corn as the drought has gripped the nation’s farm belt.
Meat producers are demanding that the administration of President Barack Obama waive the ethanol quota to ease rising feed prices. But ethanol producers worry that the loss of the quota would undermine the ethanol industry and do little for corn farmers but drive down the price of their stunted harvest.
The meat industry, backed by several governors, lawmakers and even international food agencies, argues that the quota has distorted grain markets by sucking up corn when ranchers can least afford it.
But the ethanol industry says that its corn consumption is down 12 percent since the start of the summer and that weekly ethanol production is at a two-year low. As corn prices have risen, refineries have scaled back production, idled dozens of plants and sold ethanol inventories. As a result, the industry may consume 10 percent less of this summer’s crop than last years, government and industry officials said.
”The market is already responding to the reality of this drought,” said Agriculture Secretary Tom Vilsack, a former Iowa governor who supports the quota.
Meat and poultry producers countered that the government was still ”picking winners and losers” and urged the Obama administration to ”let the market work and embrace free-market principles,” as J.D. Alexander, president of the National Cattlemen’s Beef Association, put it when he announced a petition to waive the quota two weeks ago.
Four governors, dozens of senators and scores of House members have petitioned the administration to waive the ethanol standard.
Corn growers, caught in a political tug of war between their biggest customers, are asking the government to move cautiously, if at all. (Many ethanol refineries are owned by corn farmers.)
”We have great concern and empathy for not only our members who are suffering, but all who we supply,” said Garry Niemeyer, president of the National Corn Growers Association, in a statement this week. ”This includes the domestic livestock sector, our export customers, the domestic food industry and the ethanol industry. All are suffering because of the drought.”
The corn farmers said a waiver should be allowed only if careful study showed a severe economic impact.
So far, the Obama administration seems inclined not to interfere. The president ”has been a strong believer in ethanol,” a spokeswoman, Jennifer Psaki, said during Mr. Obama’s trip to Iowa this week. ”He absolutely believes in it – he thinks it’s a driver of the economy here and a key […]

By |2012-08-31T07:40:09-05:00August 31st, 2012|Uncategorized|0 Comments

Pro Farmer 2012 Corn, Soybean Crop Estimates

AUGUST 24, 2012
By: Pro Farmer Editors

2012 Midwest Crop Tour: Eastern Leg
Pro Farmer pegs 2012 U.S. corn crop at 10.478 billion bu.; avg. yield 120.25 bu. per acre
+/- 1% = 10.374 billion bu. to 10.583 billion bu.; 119.05 bu. to 121.45 bu. per acre
Pro Farmer pegs 2012 U.S. soybean crop at 2.60 billion bu.; avg. yield of 34.8 bu. per acre
+/- 2% = 2.548 billion bu. to 2.652 billion bu.; 34.1 bu. to 35.5 bu. per acre

NOTE: We’ve made some adjustments to the acreage assumptions. Based on FSA certified acreage data we anticipate increases in planted acreage for both corn and soybeans. However, we are anticipating a harvested acreage percentage of 89.5% for corn and a slight downward adjustment in the harvested acreage percentage for soybeans. Learn how Pro Farmer estimates their yield expectations.

CORN
Ohio: 124 bu. per acre. The Midwest drought started in northwest Ohio. South and east of there extreme moisture and heat stress will guarantee below-average corn yields.

Indiana: 101 bu. per acre. Eastern Indiana showed extreme drought stress. A lack of ears and grain length pulled yields down.

Illinois: 116 bu. per acre. The eastern half of Illinois was the epicenter of this summer’s drought — and it was proven by this year’s Tour. Corn yields were better in some western and northern areas of the state, but standability is a major issue.

Iowa: 139 bu. per acre. Corn yields in the western one-third of the state were down 11% from last year, but the real problem is in the eastern two thirds of the state. Iowa’s early start to the growing season turned into a mid-season nightmare for corn trying to pollinate and fill kernels.

Minnesota: 152 bu. per acre. Crop District 7 is the problem in Minnesota as is the western half of Crop District 8. Corn yield and plant health improved dramatically in the eastern half of the state where yield potential is very good.

Nebraska: 138 bu. per acre. Kernel size is the villain in Nebraska, and that is what makes the husker state a swing state on corn yields. Even irrigated yields were off about 10% from year-ago, while dryland corn yields will be determined by kernel size.

South Dakota: 85 bu. per acre. We hit South Dakota hard on harvested acres and yield. This was absolutely the worst corn crop we’ve sampled since 1998 when the Crop Tour started in the western Belt.

SOYBEANS
Ohio: 40 bu. per acre. In addition to low pod counts, heavy weed pressure in some of the state may hold down yields even more than indicated on the Tour.

Indiana: 36 bu. per acre. This is where we started to see the trend of pods not forming on the lower half of plants. The lack of production factory hurts yield potential.

Illinois: 36 bu. per acre. The crop must work to hold onto what yield potential is there, as the crop is done blooming. Extremely dry soils could lead to pod abortion and further reduction in yields.

Iowa: 41 […]

By |2012-08-24T15:45:44-05:00August 24th, 2012|Uncategorized|0 Comments

• Tight corn supplies will force cuts, losses

The bulk of the bad news regarding the 2012 crops should be in by now, according to Tim Brusnahan with Brock & Associates Inc. Brusnahan, together with Dr. Chris Hurt of Purdue University, was a speaker at WATT’s August 13 webinar, “August Crop Report: Analysis and Implications.”
Brusnahan noted that with corn at $8.00 per bushel, there has been a shifting to alternatives such as feed wheat. Unfortunately, there is not enough feed wheat available to significantly impact corn demand. “So overall, we still have a fairly tight supply around the world,” he said.
Brusnahan also observed that erratic rainfall throughout the Midwest still leaves some volatility in the soybean sector, as final yields may come in lower than U.S. Department of Agriculture estimates. This will also provide opportunities for South America to plant large crops and take advantage of high prices.
He summarized that in regard to money flow, the large speculator remains long corn, soybeans, soybean meal, wheat, cattle, hogs and Class III milk. As to U.S. corn and soybeans, corn prices indicate zero carry and soybeans have a large inverse that should cause producers to move their crop to market at harvest. For ethanol, margins have improved and remain in a state of rebalancing. For DDGS, supplies and use are a little uncertain until more is known of Midwest corn quality.
Hurt, a professor of agricultural economics at Purdue, noted that the current drought will most likely end up being the second or perhaps third largest natural disaster in the U.S. in the last 30 years, after Hurricane Katrina and the 1988 Midwestern drought. “Bottom line, there’s not going to be enough corn to go around,” Hurt said.
For the animal industry, Hurt described conditions in the short run as being “very bleak.” He indicated that there will be losses for all species across the board for the next 12 to 14 months. “This will result in some liquidation of herds, it’s going to reduce supplies, and over time it’s going to bring up retail prices of those animal products and, therefore, the wholesale prices and the farm-level prices.”
However, Hurt said this will ultimately give cause for some long-term profits in late 2013 and into 2014 and 2015. The challenge, he noted, will be getting through the next 12 to 14 months.

By |2012-08-17T15:45:32-05:00August 17th, 2012|Uncategorized|0 Comments

Important Crop Report Soon

USDA August crop reports this week
Attention on USDA’s first survey-based look
at the corn and soybean crops is greater than
normal as traders wait to see how low USDA
will go with its initial crop estimates.
Persistent drought conditions have greatly
trimmed yields. But yield is only one factor in
the total production equation. Another key is
how much USDA reduces harvested acres. In
June, USDA estimated harvested corn acres
at 88.851 million. That figure will be lower,
some feel significantly lower. In June, USDA
estimated harvested soybean acres at 75.315
million acres. USDA surveyed both planted
and harvested bean acres for August.
What NASS does with its Aug. 1 corn and
soybean crop estimates will largely determine
how aggressive the World Board must get
when cutting 2012-13 usage projections for
corn and soybeans.
No change in report times anticipated
The public comment period USDA sought
on report release times is closed. USDA
could change the time it releases key report
data, but our contacts signal that is not likely
ahead of the Aug. 10 reports.

By |2012-08-07T06:56:12-05:00August 7th, 2012|Uncategorized|0 Comments