Monthly Archives: March 2013

MARCH 27, 2013
By: Nate Birt, Farm Journal Social Media and News Editor

A recent visit to Amarillo, Texas, put the drought situation into perspective for Pro Farmer editor Chip Flory. With corn planting underway, he says, farmers already were turning on the pivots just to get the crop to emerge from the ground. They had received just 4″ of rain in the previous 30 months.
“We’re looking at historic situations, whether it be trends in prices or trends in yields,” says Flory, who presented his 2013 grain outlook on Tuesday during a webinar hosted jointly by Farm Journal and Watt Ag Media. “The drought that we’ve got in the central and western Corn Belt and the central and southern plains is a tough one.”
Both Flory and Tom Elam, president of FarmEcon LLC, say uncertainty over weather conditions will result in volatile grain prices. They spoke ahead of the prospective plantings and quarterly grain stocks reports due out Thursday.
“It makes hedging and cash contracting a nightmare,” Elam says. While corn prices could climb to $10/bu. under a drought scenario comparable to that of 2012 and an average national yield of 125 bu./acre, that price wouldn’t last long, he adds.
“That’s just too much stress on the system,” Elam says.
The potential range for old- and new-crop corn prices this year is $4/bu. to $8/bu., Flory says. He indicated he is hesitant to say an excellent growing season is developing simply because planting isn’t getting underway as quickly as it might have.
Uncertainty surrounding the timing of planting, summer weather and other factors makes it difficult to pin down prices, Elam says. In particular, the “loaded gun” that is the western Corn Belt drought is an important consideration.
As for the exports forecast, Flory says they are the lowest he’s seen in a long time. The drought “erased 40 years, or four decades’, worth of work to build up the export market for U.S. corn,” he says, and it will time to get back to past levels.
At the same time, exports have helped sustain the meat and poultry production system in the last three years, Elam says. Livestock and poultry feeders will continue to be challenged by high and ever-changing feed costs. Meanwhile, nine poultry companies have declared bankruptcy since 2008, and two more have undergone forced sales. Two more meat plants shut down recently. Increasing demand for ethanol under the Renewable Fuel Standard will limit corn availability further in the future.
A slight increase in poultry production is expected to offset a slight decline in beef production in 2013, Elam says. That’s miraculous given the cost-per-pound increase producers have experienced, coupled with an ongoing decline in meat consumption per capita.
Other points of interest from the webinar:
Soft red winter wheat is in good shape, likely resulting in an early supply of feed from the Eastern Corn Belt.
About 9.5 million acres of cotton likely will be planted this year in the U.S. That’s below USDA projections of 10 […]

Mar. 20, 2013

Source: Worldwatch Institute news release

Some 1.2 billion people-almost a fifth of the world-live in areas of physical water scarcity, while another 1.6 billion face what can be called economic water shortage. The situation is only expected to worsen as population growth, climate change, investment and management shortfalls, and inefficient use of existing resources restrict the amount of water available to people, according to Worldwatch Institute’s Vital Signs Online service (www.worldwatch.org).

It is estimated that by 2025, 1.8 billion people will live in countries or regions with absolute water scarcity, with almost half of the world living in conditions of water stress.

Water scarcity has several definitions. Physical scarcity occurs when there is not enough water to meet demand; its symptoms include severe environmental degradation, declining groundwater, and unequal water distribution. Economic water scarcity occurs when there is a lack of investment and proper management to meet the demand of people who do not have the financial means to use existing water sources; the symptoms in this case normally include poor infrastructure. Large parts of Africa suffer from economic water scarcity.

World population is predicted to grow from 7 billion to 9.1 billion by 2050, putting a strain on water resources to meet increased food, energy, and industrial demands. But there are many other pressures, including increased urbanization and overconsumption, lack of proper management, and the looming threat of climate change.

According to the United Nations Food and Agriculture Organization and UN Water, global water use has been growing at more than twice the rate of population increase in the last century.

At the global level, 70 percent of water withdrawals are for the agricultural sector, 11 percent are to meet municipal demands, and 19 percent are for industrial needs. These numbers, however, are distorted by the few countries that have very high water withdrawals, such as China, India, and the United States.

Agricultural water withdrawal accounts for 44 percent of total water withdrawal among members of the Organization for Economic Co-operation and Development (OECD), but this rises to more than 60 percent within the eight OECD countries that rely heavily on irrigated agriculture. In the four transitional economies of Brazil, Russia, India, and China, agriculture accounts for 74 percent of water withdrawals, but this ranges from 20 percent in Russia to 87 percent in India.

Policymakers must introduce a variety of measures to address global water scarcity. One important initiative is to support small-scale farmers.

Much of the public investment in agricultural water management has focused on large-scale irrigation systems. Farmers can also use water more efficiently by taking a number of steps, including growing a diverse array of crops suited to local conditions and adopting irrigation systems like “drip” lines that deliver water directly to plants’ roots.

Climate change will affect global water resources at varying levels. Reductions in river runoff and aquifer recharge are expected in the Mediterranean basin and in the semiarid areas of the Americas, Australia, and southern Africa, affecting water availability in […]

March 11 (Bloomberg) — Corn rose for a third session in Chicago as a government report showed U.S. inventories will remain at a 17-year low on increasing use of the grain in livestock feed. Soybeans and wheat advanced.
U.S. corn stockpiles before the next harvest will be 632 million bushels, the Department of Agriculture said March 8, leaving its forecast unchanged at the lowest since 1996 even as analysts predicted a climb to 646 million bushels. The USDA raised its forecast for corn use in animal feed to 4.55 million bushels, from 4.45 million bushels. Corn stockpiles worldwide will drop to 117.5 million metric tons, smaller than the 118 million tons predicted last month.
“Adjustments look bullish, as U.S. corn stocks remained unchanged, against higher stocks estimated by analysts,” Arnaud Saulais, a broker at Starsupply Commodity Brokers in Nyon, Switzerland, said today in an e-mailed report. “Low-priced wheat was thought to be displacing corn feed for livestock.”
Corn for delivery in May gained 0.4 percent to $7.0625 a bushel by 7:39 a.m. on the Chicago Board of Trade, after climbing 2.2 percent in the previous two sessions. Soybeans for the same delivery month rose 0.4 percent to $14.765 a bushel. Both crops surged to records last year in Chicago trading because of the worst U.S. drought since the 1930s.
Argentine Harvest
World soybean harvests will total 268 million tons, 1.5 million tons smaller than February’s estimate, as the production outlook was lowered for Argentina, according to the USDA. The Argentine crop, the third-largest globally, will be 51.5 million tons, down from 53 million tons forecast last month, it showed. The outlook for U.S. inventories was unchanged at 125 million bushels, the lowest since 2004.
“Prices are rising as stockpiles from the current crop decline,” Makiko Tsugata, an analyst at Market Risk Advisory Co., said today. “The downward revision of the USDA estimate on Argentina’s production is also a strong factor pushing prices higher over the short term.”
Wheat for delivery in May rose 0.2 percent to $6.9825 a bushel. In Paris, milling wheat for the same delivery month climbed 1 percent to 232.50 euros ($302.17) a ton on NYSE Liffe.

Exports for U.S. soybeans will soften once South America’s crop hits the market

Soybean exports will soften as more of South America’s beans become available to the world market, and corn demand will remain strong offsetting the soft export market for corn, according to USDA’s latest World Agricultural Supply and Demand Estimates (WASDE), released March 8.
“In general, the report is a neutral report, relatively well-anticipated by the trade,” says Jim Bower, president of Bower Trading in Lafayette, Ind. Bower was the analyst on a post-report MGEX press conference call.
Looking at corn first, USDA left projected 2012-13 U.S. corn ending stocks unchanged at 632 million bushels. The department also lowered projected corn exports by 75 million bushels, a move that was widely anticipated, and raised both feed use and corn imports.
“Corn exports have been dismal for the past couple of months,” says Bower. The trade was anticipating that USDA would lower its forecast for corn ending stocks, which could be considered a small surprise in the numbers.
Competition from South American corn exporters has been stronger than expected, notes USDA in the report. Competitively priced feed wheat has also hurt U.S. corn exports, the department notes.
USDA’s forecast for feed and residual disappearance for corn was raised 100 million bushels due mostly to expansion in poultry production
USDA’s projected season-average farm price for corn was lowered 20 cents on the high end of the range to $6.75 to $7.45 per bushel.

Soybean exports to soften
Concern over tightness of old-crop U.S. soybean supplies was a major concern heading into the report, but USDA left ending stocks of old-crop soybeans unchanged at 125 million bushels, which is slightly higher than expected.
“USDA is somewhat hesitant to bring the estimate of the soybean carryout lower,” says Bower. “In Brazil, the line up at two ports of embarkation is eight to nine days. There is 9.9 million tons of cargo space waiting to be loaded.”
Eventually, he says, Brazil’s supply of soybeans will hit the world market, but until it does, China will continue to buy from the United States, and that will support prices.
“Although soybean export commitments through February exceeded last year’s pace, U.S. exports are expected to decline in the months ahead as increased competition from a record South American soybean crop limits additional U.S. sales during the second half of the marketing year,” says USDA in the report.
USDA narrowed its projected season-average price range for soybeans by 25 cents on both ends of the range to $13.80 to $14.80 per bushel.

World snapshot
USDA lowered its world ending stocks estimate for corn, from February’s 118 million metric tons to 117.5 million metric tons this month. World production was cut 310,000 metric tons on reductions in the size of both Argentina’s and Brazil’s corn crops.
USDA raised ending stocks of world soybeans slightly to 60.21 million metric tons, up from February’s 16.12 million.
“It takes the edge, at least temporarily, off the tightness in the soybeans,” says Bower.
USDA lowered its projected world production figure for soybeans to 268 million metric tons […]

High-Profit Vs. Low-Profit Beef Producers

The prices of fuel and equipment have risen significantly faster over time than the market value of cattle. Therefore, I prefer a production system highly dependent on soil, sunlight, rainfall, and our ingenuity and inventiveness, than one highly dependent on fossil fuels and equipment. Most of the following suggestions will tie back to this statement, as well as the fact that cattle prices tend to be cyclical and will most likely decline again at some time.
In my travels, I have visited with many ranchers who struggle to be profitable, even with the good prices of the last few years. At the same time, I talk with ranchers who are having the highest profit years of their lives. Nonetheless, this latter group of ranchers assumes that cattle prices will go down and that the price of purchased inputs will continue to rise, largely because of fuel and equipment prices. As a result, they are paying attention to several, or even all, of the following factors:
• Ranch size. There are significant economies of size in ranching. Unless there are sources of income besides cattle, small ranches struggle to be profitable and sustain a good standard of living. However, small ranches run by people with off-farm jobs can be very profitable if they keep it simple, and keep overhead low. In fact, they can compete very well with medium-sized ranches where the operators only work on the ranch.
• Cows per worker. Except for land-associated costs, many ranches have more costs that align with the number of workers than with the number of cows. I know of many ranches that run 800-1,200 cows, or cow and yearling equivalent, per worker. That keeps labor, housing, equipment and horse cost per cow quite low.
• Acres per cow. My experience says it’s usually much less expensive to increase carrying capacity by developing stock water, adding fence and managing grazing than by purchasing more land. As you add cows, you don’t have to add people or other overhead. In addition, grazing management can be a very enjoyable challenge.
• Fed feed vs. grazed feed. There are very few situations where grazing more and feeding less won’t be more profitable. This may mean you begin to graze former hay land. As I travel about giving talks to groups of cattlemen, I usually hear two kinds of responses. There are those who contend it’s impossible to reduce feeding, and those who tell me about the financial progress they’re making by grazing more and feeding less. I’ve personally been involved in, and have seen, thousands of acres of hay land turned to pasture. In a few cases, pastures that previously produced winter hay are now pastured in the summer, while the cattle are wintered on what once was summer range.
• Keep debt-to-equity ratio low. I’ve seen too many cases of a rancher wanting to develop water and buy some fencing to graze better, but his operation’s debt-to-equity ratio was too high to borrow money. Low debt gives you […]