Articles

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.”
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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 […]

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.

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.