Archive for November, 2012

Tuesday, November 27, 2012 @ 12:11 PM
posted by Administrator

NOVEMBER 27, 2012
By: University News Release

By Steve Leer, Purdue University
The United States remains the world’s corn export king, although its empire is shrinking, says a Purdue University agricultural economist.
Foreign nations that previously relied on the U.S. for corn are growing more of their own or buying from other producing countries, said Philip Abbott. He predicted the trend will continue even if market conditions improve and U.S. corn production increases.
“The U.S. has historically been a very important part of the international corn market,” Abbott said. “Prior to the 2007-08 food crisis and spike in commodity prices, the U.S. exported well over half the amount of corn that entered international markets. Since then, the high prices have caused the rest of the world to expand their production and become more self-sufficient.
“Even if we get bigger corn crops in the future, it’s likely that the demand in foreign markets will not soon recover to the level that it once reached.”
U.S. Department of Agriculture statistics bear that out. In the 2007-08 marketing year, the U.S. exported 2.4 billion bushels of corn. The USDA estimates just 1.1 billion bushels of U.S. corn will be exported in the 2012-13 marketing year.
What has happened to U.S. corn exports, and why might the U.S. not claim 50% of future world corn markets? There are a few reasons, Abbott said.
First, ethanol. The federal Renewable Fuel Standard mandates that gasoline sold in the U.S. be blended with ethanol. This year, the law requires oil companies blend 13.2 billion gallons of ethanol with the gasoline they produce. Next year, the blending requirement increases to 13.8 billion gallons.
Corn is the primary feedstock of ethanol, and 5.5 billion bushels of U.S. corn were used for that purpose in 2011-12.
“Roughly 40% of the corn that’s produced in this country is used in ethanol, although some of it is later used as distillers grain for livestock feed,” Abbott said. “That’s up from about 10-12% five years ago. The amount of corn that makes up the increase is more than we export.”
Because the law requires that ethanol be produced, there is less corn available for other non-ethanol users, including foreign buyers and U.S. livestock producers. The high demand for corn, coupled with the partially regulated market, has pushed corn prices higher.
Secondly, the U.S. has not kept up with many other nations that have significantly increased their corn acreage. Although U.S. farmers have shifted acreage away from other crops and into corn, competing nations and customers have significantly increased their area planted.
“We haven’t expanded overall planted area like the rest of the world. Our acreage is basically flat,” Abbott said.
Since the late 1990s, South America has boosted crop acreage 53%. The nations that make up the former Soviet Union are growing crops on 24% more acres, with acreage up 13.4% in sub-Saharan Africa and Oceania. By contrast, crop acreage in the European Union is off 4%.
U.S. corn exports were further hurt by the summer drought. According to the USDA, domestic corn production is expected to be down 13% from 2011, at 10.7 billion bushels. That would represent the lowest corn production volume since 2006.
For those reasons, the outlook for U.S. corn exports going forward is less positive than a few years ago, Abbott said.
“We’ve tried to accommodate the export markets by working to increase production, but we haven’t managed to do that,” he said. “We’ve had to keep feed use flat and watch exports shrink.
“All the hard work we did to build export markets has been hurt by the high commodity prices of the last four or five years. As a result, the world has figured out ways to meet their own needs. And with a couple of exceptions like China buying more soybeans, we’re probably going to see weaker export demand in the future.”

Monday, November 26, 2012 @ 12:11 PM
posted by Administrator

November 26, 2012

The difference between selling 550 lb. steers at the peak and the bottom of the 2012 market was a remarkable $286 per head. It was, of course, the weather this time—too little grass, too little corn. Nobody knows yet what will happen in 2013, but here are five areas to keep your eye on.

1. Weather. The National Oceanic and Atmospheric Administration assumes “normal” weather next year, with a few rainy pockets in parts of the country. Not long ago, it was looking for El Niño to deliver lots of moisture to the most important grass and corn areas. A third year of drought is the last thing cow–calf folks can afford. The direct impacts are bad enough. Ranchers have to sell cows—suppressing prices—and calves come off early and small, reducing their gross value. But the indirect costs of high-priced hay, supplements and corn are just as bad.

2. Demand. Beef demand has been resilient despite high prices, but the economy—in the U.S. and the world—is in a precarious state. Most of the developed countries have been borrowing from the future, and if they get serious about tightening their belts, we could be in for more recession. With it would come lower demand for all foods, especially beef.

3. Competing meats. The bland meats—pork and poultry—have had a harder time than beef in passing along the added costs from the corn market. Producers have begun scaling back output, but consumers have seen their relative costs for broiler parts and pork chops increase less than beef. As production is reduced, they should lose some of their bargain appeal. USDA-ERS retail meat price chart.

4. Carcass size. For years, one could assume that higher corn prices meant smaller carcasses. But as feeders and packers have struggled to keep their volume and tonnage up, they’ve opted to make cattle bigger. Will this trend continue—especially if corn gets cheaper, making extra pounds more affordable?

5. The dollar. The dollar has its own volatility-risk factor, and foreign customers—who buy offal as well as an increasing percentage of beef—figure their prices on their own currency. The dollar’s strength combined with overseas recession hurt export demand this year, but much depends on how Washington decides to deal with the ongoing budget challenge.

Keep on Holding on

With cattle numbers at historic lows, the difference between dry and not-so-dry will be huge. Timely rains in cow country would likely to tempt some to rebuild herds, further reducing the already tight supply of beef. Presumably, such rains would also weaken the feed markets—reducing costs for wintering cows and offering feedlots some breathing room on corn prices.

You don’t always have the option, but holding calves longer typically pays more. Feed conversions and costs vary, but estimates by the Michigan State University Beef Team in the bulletin “What Can I Afford to Pay for Feeder Cattle during 2012–2013?”, give an idea of how complicated the outlook is. Assuming a $1.20 fed cattle price and $7.50 for corn, your buyer could afford to pay you $792 for a 550-lb. calf or a neat $1,000 for the same steer at 800 lb. That is a 83¢ per pound value on your gain, or more if you add in the traditional spring price rise. Plus, since your buyer is a cattle feeder and pen space is abundant, he will pay you a little more than those prices. Always has, always will. But then again, the longer you own them, the more risk you run of having one of the five risk factors going sour.

Tuesday, November 13, 2012 @ 11:11 AM
posted by Administrator

Issued by Darrel Good, University of Illinois

The USDA’s November forecasts of the size of the 2012 U.S. corn and soybean crops were larger than expected, particularly for soybeans. As a result, the general downtrend in soybean prices since mid-September has accelerated, with January futures now at the lowest level since June 29.

Corn prices have moved into the lower half of the trading range that has been in place since mid-September and December futures are at the lowest level since September 28. So far, prices seem to be following the classic pattern associated with small crops -peaking early in the marketing year and then declining as the year progresses.

The futures market reflects expectations that prices will continue to decline, especially into the 2013-14 marketing year. The expected rebound in South American soybean production, Argentine corn production, and U.S. corn and soybean production in 2013 all contribute to the expectation of lower prices. If those crops are as large as generally expected, prices will be even lower than currently reflected in the futures market.

The USDA is forecasting record South American production of both crops. If planted acreage of corn in the U.S. in 2013 is at the same level as in 2012 and the U.S. average yield is near a trend value of 162.5 bushels, the crop would total 14.6 billion bushels, about 1.5 billion larger than the record crop and record consumption of the 2009-10 marketing year.

Similarly if soybean acreage is maintained at the 2012 level and the average yield is near the trend value of 43.8 bushels, the 2013 crop would reach 3.34 billion bushels, near the record levels of 2009 and 2010. A combination of record, or near record South American and U.S. crops in 2013 would likely push prices down to or below the long term averages of about $4.75 for corn and $11.00 for soybeans.

While the expectation for lower corn and soybean prices in 2013 is reasonable based on historical patterns and prospects for large crops, the timing and speed of the return to more “normal” prices will be influenced by a large number of factors. The final estimate of the size of the 2012 crops to be released on January 11, 2013 is one of those factors.

For soybeans, the pattern of 2012 yield forecasts to date, lower in September and higher in October and again in November, was experienced six other times in the previous 30 years. The yield estimate released in January following harvest in those six years was above the November forecast three times and below the forecast three times. The deviation ranged from 0.1 to 0.8 bushels. History does not provide much guidance for forming expectations this year.

For corn, the pattern of yield forecasts this year, lower in September and October and higher in November was experienced only two other times. The January yield estimate equaled the November forecast in one of those years and exceeded the November forecast by 0.7 bushels in the other. Again, history provides little guidance for forming January yield expectations this year. The bigger issue for corn production, however, may be the January estimate of acreage harvested for grain. There is a general expectation that the USDA’s large December survey may reveal fewer acres than currently forecast.

On the supply side, the progress of the South American crops will be most important for the next three months. Weather conditions are currently improving somewhat from early wet conditions in Argentina and dry conditions in central and western Brazil. Some on-going dryness is noted in southern Brazil and Paraguay. Some argue that corn production potential has already been reduced in Argentina. For the near term, markets will likely continue to reflect expectations of very large crops.

Prices will also be influenced by the on-going rate of consumption of the 2012 U.S. crops. For corn, there is some anticipation that the pace of export activity, which has been extremely slow to date, may accelerate as South American supplies dwindle and Asian customers return to the U.S. market.

The larger issue, however, surrounds the pace of domestic feed and residual consumption. The USDA’s estimate of December 1, 2012 stocks to be released on January 11 will provide some much needed clarity to the rate of consumption in the last quarter of the 2011-12 marketing year and the first quarter of the 2012-13 marketing year.

For soybeans, the National Oilseed Processors Association estimate of the size of the October crush is expected to be released later this week. That estimate will provide insight into the pace of crush relative to the projected rate. The pace of new export sales will also be important, with some concern about cancellations of earlier purchases by some customers.

Prospects for further price declines for corn and soybean into 2013 favor pricing more of the old and new crop sooner rather than later. However, the transition to lower prices will be erratic so that timing of sales will still be important. Recent price declines, particularly for soybeans, seem to be a little excessive given the amount of production uncertainty.

Friday, November 2, 2012 @ 11:11 AM
posted by Administrator

NOVEMBER 2, 2012
By: Rhonda Brooks, Farm Journal Seeds & Production Editor

An adequate amount of seed corn is available to plant in 2013, but the popular hybrids will be in tight supply.
In the future, you may look back on 2013 as the year you were happy to get your second or even third choice of corn hybrids. That’s because industry leaders say many of the most popular hybrids will be available in only limited supplies as a result of the historic 2012 drought.
Corn hybrids hit hardest by drought this past summer were the 105-day and later maturity ones, notes Kent Schulze, an associate with Minnesota-based Cornland Consulting. Schulze estimates that 90% of the total U.S. seed corn crop was grown this year in drought-impacted areas.
“Even the best-irrigated fields in those droughty areas will come up 10% to 20% off normal yields, and I expect dryland (seed corn) acres will be worse,” Schulze says.
Heat was also a big driver in seed corn production this year, according to Dave Snedden, North America row crops manufacturing lead for Monsanto. He says prolonged high temperatures for multiple days and nights during the pollination period were just as hard on seed corn crops as the lack of moisture. To mitigate such risks, Snedden says Monsanto spreads its seed corn crop acres across the U.S. from east to west and north to south.
“Our seed crops are grown on a mix of soil types and under a variety of agronomic conditions,” adds Dan Case, DuPont Pioneer supply planning manager.
More than enough.
Seed companies routinely produce more seed than is needed in any given year. Such standard plans were in place this year.
“We planned for twice the number of acres we actually sold corn for in 2011,” says Scott Beck, vice president of Beck’s Hybrids. He adds the company has an adequate supply of its leading hybrids going into 2013.
Other companies report they also have adequate amounts of seed for farmers to plant next spring, thanks to a combination of carryover seed from previous years, summer production and winter production, explains Craig Newman, chief executive officer for AgReliant Genetics, Westfield, Ind.
Schulze says enough seed corn is available to plant 95 million corn acres in 2013 if companies clean out their warehouses and existing pipeline. “But once you get into the corner of the warehouse, people are going to get their third or fourth choice of hybrids,” he contends.
That’s not necessarily all bad, he adds, explaining that older seed products in warehouses may have higher germination and overall quality than some of the hybrids from this year.
“Farmers still need to be thinking about selecting hybrids best suited for their ground—hybrids that are solid, stable performers—and planting them in a timely manner,” says Chris Garvey, general manager of Mycogen Seeds at Dow AgroSciences.
Winter wonderland.
Seed production now underway in Argentina and Chile will play an important role in boosting the availability of hybrids for U.S. farmers next spring.
Newman estimates winter production will provide between 15% and 20% of the seed corn farmers plant in 2013.
Schulze says increased winter production is contributing to an increase in retail seed prices of 4% to 8% over last year. Pro Farmer estimates seed corn costs will average $95 per acre.
“Stay close to your seed dealer so you know what’s going on,” Schulze recommends.
Farmers are responding proactively to seed companies’ urging to buy seed corn early this year, according to a Farm Journal Pulse survey, a text message poll of farmers and ranchers. When asked when they plan to purchase their seed corn hybrids for the 2013 crop, 85% of the 1,447 producers surveyed replied they will complete their purchases by December 31.
Newman says because seed supplies are so tight he expects 2013 will be a “huge” seed production year. His perspective: “It’s going to take us a couple of years to refill the pipeline and get back to some level of normal,” he says.