Archive for April, 2013

Tuesday, April 23, 2013 @ 11:04 AM
posted by Administrator

April 23, 2013
by Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist
There seems to be a chill on cattle markets…both literally and figuratively. Cattle markets remain hunkered down due to weather and other impacts. The unrelenting cold, wet spring continues to have a variety of impacts on both the supply and demand sides of cattle and beef markets. Domestic beef demand is stagnant and certainly seems to be lacking the seasonal push that usually accompanies warm weather.
Choice boxed beef cutout has been hovering near the $190/cwt. range with little sense of direction the past three weeks. The Choice-Select Spread has widened seasonally but is the result of weaker Select values rather than strength in Choice values. International demand for U.S. beef has also weakened amid Russian concerns with Ractopamine and weakness in major markets, such as Mexico, where relatively high U.S. beef values have been aggravated by a somewhat stronger dollar since January.
There is growing evidence that extended cold weather has increased beef cow liquidation. Total beef cow slaughter has been up 11.1% the last 4 weeks after declining early in the year. Year to date beef cow slaughter is now down a scant 3.7% from last year. Increased beef cow slaughter appears to be regionally widespread, though regional slaughter data are incomplete. In Region 6, the Southern Plains, beef cow slaughter has been up 15.2% the last four weeks but is still down nearly 12% for the year to date. Oklahoma auction data confirms the recent increase in cow culling as cow and bull volumes in federally reported auctions have been up nearly 23% since mid-March after declining over 24% from January through mid-March.
The latest Cattle on Feed report also suggests weather impacts on feeder markets. Unexpectedly large March feedlot placements were largely concentrated in Texas and Kansas. The Kansas placements were mostly heavy weight feeders from winter backgrounding programs. In contrast, the Texas placements were spread across lightweight to heavier feeder cattle and were likely partly the result of drought induced sales. Some may have been directly from cow-calf liquidations and others the result of forage shortages in winter stocker programs. The fact that large placements occurred in conjunction with weak feeder cattle prices suggests that the movement was more of a supply driven market situation rather than demand driven.
The Cattle on Feed numbers may also suggest implications for the broader cow herd. The number of heifers on feed has fallen sharply since the middle of 2012. The April 1 heifer on feed inventory was down 7.6% year over year. However, this value is less of a decrease than the January 1 heifer on-feed total, which was down 9.5% from the previous year. This likely indicates that much of the increased feedlot placements were heifers, probably including some heifers designated as replacements in the January inventory report. The combination of increased beef cow slaughter and relatively more heifers on feed at this point likely means that any prospects to avoid additional beef herd liquidation in 2013 may already be seriously eroded.

Friday, April 12, 2013 @ 03:04 PM
posted by Administrator

By: Jeanne Bernick, Top Producer Editor

How do recent droughts compare to 30 years ago?
The drought that settled over more than half of the U.S. last summer was the most widespread in more than 50 years, and now a long dry winter has set up farmers for a nail-biting spring.

Little in our lifetimes tops the 2012 drought disaster, which goes down as among the ten worst of the past century, according to a new report released by the National Climatic Data Center (NCDC). With records dating to 1895, NCDC’s State of the Climate shows only the extraordinary droughts of the 1930s and 1950s covered more land area than the 2012 drought. By a slight margin, last summer’s drought actually covered more land mass than the infamous 1936 drought.

However, when areas classified as “moderate” drought are excluded, the historical rankings change, notes Elwynn Taylor, Iowa State University climatologist. Some droughts were extremely intense, but focused on specific regions rather than sprawling across large swaths of the country.

For example, droughts in 1988, 2000 and 2002 included more than 35% of the U.S. in the “severe” to “extreme” drought categories on the Palmer Drought Severity Index. By comparison, severe to extreme drought covered 32.7% in June 2012.

The drought of 30 years ago was no slouch. The 1983 Midwest drought was associated with very dry conditions, severe heat and substandard crop growth, which affected prices and caused hardship for farmers. Multiple disaster declarations went out in Indiana and neighboring states. Readings of 100° F and higher became prevalent in 1983 during these dry spells across the Midwest, Ohio Valley and Great Lakes regions. The heat waves killed 500 to 700 people.
Heading into 2013. In an ironic end to a winter spent fretting about drought, late snows and heavy rains last month renewed the rising of Midwestern rivers. Current conditions show a change in deep soil moisture levels in the eastern U.S.

Nevertheless, drought situations today will have more impact on food prices than 30 years ago, to the tune of about $3.4 billion during the next year or two, says Paul Walsh, a weather analyst for The Weather Company and The Weather Channel. “It has a huge impact, particularly on winter wheat and areas like Colorado,” Walsh says.

By March, Colorado had only seen 50% of its normal snowpack. “That affects agriculture dramatically because water from the snow pack services crops throughout the West.”
Apples-to-Apples Drought Comparison Difficult
The Drought Monitor report debuted in 1999, and the period of detailed records began in January of 2000. One of the many inputs in the Drought Monitor report is the Palmer Drought Severity Index. This index, developed by meteorologist Wayne Palmer in the 1960s, uses mathematical equations incorporating precipitation and temperature data to estimate evaporation, runoff and soil moisture recharge.

The National Climatic Data Center maintains a database of monthly Palmer drought indices dating to 1895. Because of this much longer period of record, the Palmer index can be used as more of an “apples to apples” comparison between recent weather conditions and those from past decades, at least on a meteorological basis.

However, differences in land use and farming practices since the Dust Bowl make the comparison of real-world impacts more complicated. Erosion-control practices and drought-resistant crop hybrids are just two examples of ways in which modern agriculture attempts to mitigate the impacts of severe drought.

Monday, April 8, 2013 @ 12:04 PM
posted by Administrator

APRIL 3, 2013
By: Ed Clark, Top Producer Business and Issues Editor

Models point to crop prices moderating
Enjoy this year. Profitable prices are likely to continue, although nowhere close to last year’s record for key crops. High commodity prices and large crop insurance indemnity payments are projected to lead to record U.S. farm income in 2013. In fact, this year will be the third straight of high farm income, the highest since the early 1970s, record or not.

Beyond 2013, however, prepare yourself for a shocker. Economic models show that from the 2012/13 marketing year to 2014/15, average farm corn prices are expected to decline $3.50 per bushel, from $7.60 per bushel to $4.10, according to USDA long range projections. More immediate forecasts have lowered 2012/13 corn expectations somewhat, but prices are still expected to average above $7 for the current marketing year (as of mid-March). Similar rates of decline are forecast for other crops, too.
“One factor seems certain: despite a drop in incomes over the next few years, producers will be receiving a higher percentage of their income from the marketplace.”
From the $4.10 low in 2014, corn prices will post modest gains each year, yet will not rise out of the $4 range from 2014 any year to 2022, USDA reports. From 2015/16 to 2022/23, the department calculates corn prices range from $4.30 to $4.85, with year-over-year improvements.

Slightly higher long-range prices of $4.81 for corn from 2014 to 2022 are forecast by the Food and Agricultural Production Research Institute (FAPRI) at the University of Missouri.

Can producers break even on that? “It depends on what you pay for rent,” says Pat Westhoff, FAPRI director. “If you pay top market rates, margins will be pretty tight.” The main reason for its higher corn price projection is that FAPRI assumes stronger ethanol growth during the period than USDA. In particular, the institute sees ethanol consumption breaking through the 10% blend wall while USDA does not.

Even though corn prices are expected to average sub-$5 from 2014 to 2022, volatility is likely to continue, even as global supplies increase. Corn prices could be less than $3.50 per bushel or more than $6 in any given year, FAPRI models suggest. Westhoff explains those prices are based on computer-generated probabilities of 500 possible outcomes.

“Actual volatility and uncertainty may be greater,” he warns. In addition, both FAPRI and USDA projections assume trend yields, which might not materialize, as last year proved.
Corn for China? One particularly good piece of news for corn growers is export potential through 2022. “We expect China to emerge as a large player in U.S. corn exports,” Westhoff says.
China will account for about 40% of the global growth of corn imports during the period, according to USDA.

The U.S. will remain the world’s largest corn exporter, in USDA’s view, accounting for an average of 45% of global corn trade to 2022. This share is much lower than the 1970-2000 average above 70%, however. Chalk it up to skyrocketing U.S. ethanol use.

Corn acreage is likely to take a big hit, USDA predicts. After peaking in 2012 at 96.9 million acres, acreage drops to 90 million in 2014 and by another 4 million to 86 million acres in 2015. That’s a reduction of 10 million acres in two years. However, as global markets grow and profitability gradually improves, USDA sees an increase in corn beginning with an upswing to 88 million acres by 2016, and back up to 92 million acres by 2022.

Moreover, the department sees a silver lining to its bearish crop price outlook relative to recent years, driven by continued growth in global demand for corn and soybeans. As a result, while prices decline considerably, they remain above pre-2007 levels all the way to 2022. FAPRI agrees.

On the cost side, USDA’s model sees variable corn costs per acre marching higher during the period, from $349 per acre this year, gradually increasing in future years and be $390 by 2022.

While fertilizer prices increase, they remain below the 2008 peak, FAPRI says. Another key cost—short-term interest rates—is forecast to increase only when U.S. unemployment drops below 6.5% beginning in 2016.

Combining variable costs with USDA’s expected corn prices, net returns will fall from a high of $582 per acre in 2012/13 to a low point of $329 per acre by 2014/15, or a hit of $253 per acre in two years. Net returns will improve later in the decade, from $371 in 2015/16 to $487 by 2022/23. Corn yields, meanwhile, are forecast to post impressive growth: from 163.5 bushels per acre this year—rebounding sharply from the drought—to average 181 bu. per acre by 2022/23.
Soybeans Come Back. Looking at other crop price forecasts, FAPRI predicts average soybean prices will decline to $11.48 per bushel from 2014/15 to 2022/23. Variable costs per acre increase from $147 per acre in 2013/14 to $164 per acre by 2022/23 in USDA’s model. Net soybean returns per acre drop from $440 in 2012/13 to $317 in 2014/15—a $123 per acre decline. However, returns gradually improve from $333 per acre in 2015/16 to $385 per acre by 2022/23. USDA forecasts soybean yields to bounce back from last year’s drought-reduced 39 bu. per acre and range from 44 to 48 bushels per acre during the period.

Soybean acres see more modest reductions than corn: a drop from 77.2 million acres in 2012 to 74 million acres by 2014. Similar to corn’s trajectory, soybeans begin a modest march higher in 2015, of 75 million, and remain at 76 million into 2022.
Wheat Loses Ground. Wheat prices are forecast to average $6.21 throughout the period, from a low of $5.95 to a high of $6.36 per bushel. Its outlook is less rosy than that of both corn and soybeans.

Producer returns initially fall and then rise less than returns for other crops in subsequent years. Moreover, wheat’s net returns per acre are lower than corn and soybeans. Wheat returns decline from $249 per acre in 2012/13 to $120 per acre by 2014/15, and range between $132 and $157 per acre from 2015/16 to 2022/23.

Such modest wheat returns relative to other major crops lead to a decline in wheat plantings, continuing a long-term general downward trend since the early 1980s. USDA looks for wheat acreage to decline from a decade-high peak of 57.5 million acres in 2013 to the period’s low point of 50 million acres in 2022. U.S. wheat also loses ground against up and coming competitors.
Markets Rule. One factor seems certain: despite a drop in incomes during the next few years, producers will be receiving a higher percentage of their income from the marketplace.

For example, direct government payments will average $9.7 billion per year to 2022, far below the average of $16 billion in 2000 to 2010, reports USDA. Government payments, which represented more than 8% of gross cash income in 2005, are 2% to 3% during the projection period.

Thursday, April 4, 2013 @ 12:04 PM
posted by Administrator

APRIL 4, 2013
By: Tyne Morgan, Ag Day TV National Reporter

Thanks to little moisture and a late spring, Nebraska fields are desolate.

Giltner, Neb., farmer Zach Hunnicutt may not be sure of when he’ll get into the field to plant, but he’s certain of one thing.
“I wish the moisture situation had some better news, but for us, it’s dry and getting drier,” he says.
He says last year they received 40% of their normal annual rainfall. It’s stayed below average ever since.
“We haven’t had very much in the way of snowfall,” he says. “It’s kind of ugly to see so far. So, it will be interesting to see if some rains, they are talking about in maybe and May and April, materialize or not.”
“It’s been pretty bad, and we’re fortunate to have irrigation here,” he explains. “So, we had a crop last year.”
He says while water restrictions aren’t in place yet, if 2013 is a repeat of 2012, that could change this year.
“The biggest concern is just what are we looking at as far as how much irrigation we’re going to have to do, and I’m glad to have that problem here, to where we at least have the irrigation to manage that,” says Hunnicutt.
From little moisture, to a late spring, the fields are desolate with no planting or field work being done.
“It’s been the winter that never ends, not just on the calendar, but the snow and the cold just keeps coming,” he says.
He says the fall was conducive for field work in the area, as an early harvest and late fall rain helped. But it’s been almost six months since the last combine was parked, and now many area farmers are itching to get back in.
“It’s going to be a little tough getting everything done, if you didn’t get done in the fall, says Hunnicutt. “But for the most part, we had good fall weather. so we should be in good shape.”
The low Monday night got down into the single digits, which pushes back the likelihood of planting anytime soon even more.
“We usually aim to get in the field April 15th planting,” he says. “I’d say there’s chance we’ll make that. It’s got to warm up pretty quick.”
And with seed piling up in the shop, warmer weather can’t come soon enough.