Markets
Corn
Wheat Waiting on harvest reports
by Dr. Robert Wisner
Look for a continued sluggish market for hard and soft wheat for several more weeks as prices respond to harvest progress in the U.S., China, Europe, former Soviet republics, and then Canada in late August and September. Prices may strengthen modestly in October and November as market focus shifts to potential 2009-10 winter wheat plantings across the Northern Hemisphere and the potential for modest tightening of supplies.
Acreage estimates so far indicate old-crop soft red winter wheat acreage is down more sharply than that for hard red winter wheat.
USDA’s monthly crop estimates, to be released on June 10, July 10, and Aug. 12 will be important market indicators to watch for, along with updated world supply/demand projections that will be out on the same dates. The June 30 planted acreage and grain stocks reports will provide additional perspective on the potential supply/demand balance for the year ahead. At press time, farmers in the Spring Wheat Belt were struggling with flooding and wet fields, so potential planted acreage was still to be determined. The Spring Wheat Belt includes the Dakotas, Montana and northwestern Minnesota. Possible crop damage from early April freezes in the southern Great Plains caused some uncertainty on the amount of hard red winter wheat that will be harvested for grain.
As we went to press, season total old-crop exports of hard red winter wheat were expected to be about 20 percent lower than the previous season, along with a drop in hard red spring exports. In contrast, soft red wheat exports were expected to be only about 12 percent less than a year earlier. Early indicators suggest U.S. wheat export demand may increase at least slightly in the year ahead because of reduced foreign production. Wheat crops are expected to be below last year in Europe, former Soviet republics, and possibly China. That should help support the demand for U.S. soft red wheat. The Canadian crop will be a key influence on demand for hard wheat, especially high-quality milling.
Dr. Robert Wisner is an economist at the ISU Ag Marketing Resource Center. |
Mapping demand
by Dr. Robert Wisner
Increased demand for corn for ethanol will depend on how quickly bankrupt plants are brought back online.
Watch USDA’s weekly crop condition ratings closely as you evaluate summer and fall market prospects. If two-thirds or more of the U.S. crop is in good to excellent condition, consider short-term rallies as opportunities to boost sales of corn you’ll need to move at harvest. Also, take a close look at USDA’s June 30 planted acreage report. The soybean market just before and during the planting season was attempting to buy additional soybean acres to offset the reduced South American crop. If it was successful, corn acres may be slightly below last year. That would create potentially tighter corn supplies a year from now and would enhance prospects for profitable on-farm storage.
The three major sources of demand for U.S. corn are: 1) feed use; 2) exports; and 3) ethanol and other processing. Prospects for domestic feed use in the year ahead look steady. All major livestock and poultry species have gone through severe negative returns. The way of improvement for livestock is mainly through reduced production. Poultry will be the quickest to turn around. Hogs probably will be second. Dairy and beef will take longer to recover because of greater biological lags in reproductive processes. Reduced numbers will tend to reduce feed usage. However, we expect wheat and milo feeding to be down from last year, and as profitability improves, marketing weights may increase a little. That combination should help stabilize total corn consumption for feed.
Increased demand for corn for ethanol will depend on how quickly bankrupt plants are brought back online. Another important variable will be whether intermediate ethanol blends of 12 to 15 percent are allowed for conventional automobiles. Ethanol production is rapidly approaching a national average blend of 10 percent. With only E-10 and E-85 allowed, the market saturation point is about a 10 percent U.S. average blend.
Export demand has been very weak for the last 9 months, but should improve in the year ahead with reduced world feed-wheat exports and an estimated 600 million bushel (corn equivalent) drop in Southern Hemisphere exportable supply of feed grains. That should bring improved U.S. exports this fall and winter.
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Soybeans Demand will wane by Dr. Robert Wisner Weather and weekly crop condition ratings will be important market drivers for the next several weeks. Plan to use rallies as marketing opportunities, especially for soybeans you need to move this summer and fall for cash-flow reasons or lack of storage space. Old-crop supplies are tight, but with normal U.S. yields and a South American recovery from this past winter’s severe drought, world supplies would look more adequate for the coming year. Export demand for U.S. soybeans has been well supported by the estimated 340 million bushel decline in South America’s spring 2009 crop. Some private estimates show an even larger drop in its harvest. Foreign buyers usually shift heavily to Brazilian and Argentine supplies from April through October, but this year the shift will be smaller. Also, after last year’s severe Chinese food price inflation, the Chinese government has been stocking up on soybeans to build up its reserve supplies. Its purchases also help to support the Chinese domestic soybean market, thus signaling to its farmers to increase 2009 soybean production. Most export markets other than China have been weakened by the global economic slowdown. World economic indicators as we went to press showed a significant recovery may be delayed until the last half of 2010. If so, that would set the stage for sluggish non-Chinese demand to continue into the fall and winter, although the smaller South American crops would be an offsetting factor. U.S. domestic demand for soybeans has been weakened by very depressed returns in livestock and poultry feeding, and by the sharp drop in petroleum prices that has reduced biodiesel profitability. As we went to press, trade sources indicated about 30 percent of the nation’s biodiesel plants were idle because of negative returns. Compounding the problem for biodiesel was the EU decision to put an import duty on U.S. biodiesel to help protect its domestic industry. Prospects for a strong recovery in domestic demand look questionable, although at least slight to modest improvement looks likely in late fall and winter. |
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Cattle
Missouri is third
by Glenn Grimes
The total cow herd in Missouri at 2.1 million head on Jan. 1, 2009, was 11.6 percent smaller than in 1984. The beef cow herd this Jan. 1 at 1.992 million head was down 6.1 percent from 1984. The dairy cow herd on Jan. 1, 2009, at 108 thousand head was down 57.5 percent from 25 years earlier. (See graph)
Even though the total number of cows was down nearly 12 percent, beef production from these cows increased 42.8 percent. This increased production per cow in the herd was a result of raising calves to a heavier weight before slaughter and feeding grain to more of the calf crop.
In 1984 Missouri had 4.95 percent of the total U.S. cow herd. By 2009 Missouri was up to 5.12 percent of the U.S. herd. In 1984 Missouri had 5.66 percent of the U.S. beef cow herd and that grew to 6.29 percent by 2009, or an increase of 11.1 percent. However, Missouri lost ground as far as the dairy cow herd was concerned. In 1984 Missouri had 2.3 percent of U.S. dairy cows, but this declined to 1.16 percent by 2009 or a relative decline of 49.6 percent over these 25 years, or nearly 2 percent a year.
Missouri ranked third in the nation in the number of beef cows on Jan. 1, 2009, with 1.992 million head. This number was down 4 percent from a year earlier when we had 2.070 million head and ranked second in the nation. In 2009 Oklahoma moved into second place with 2.035 million head. In terms of the number of total cows that had calved, Missouri tied with Oklahoma for the third spot with 2.1 million head.
Our beef demand index for meat consumed at home increased 3.4 percent in the 3-month period of December 2008-February 2009 compared to this period a year earlier. According to trade reports, the weakest demand for beef during these three months was at high-end or white-tablecloth restaurants.
Demand for live fed cattle was down 7.1 percent for the December 2008-February 2009 period compared to a year earlier. Feeder cattle prices were substantially lower in early April than a year earlier with 400-500 lb. steers averaging $15-$17 per cwt. lower and 700-800 lb. steers $5-$6 per cwt. lower. Cattle feeders were paying less because of higher costs to feed the animals and lower prices for fed cattle. The price for feeder cattle is expected to remain low relative to production costs until the North American cattle herd is downsized enough to get feeder cattle production with these higher feeding costs in line with demand for fed cattle.
Glenn Grimes is a MU professor emertius and long-time market analyst.
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