Markets
Corn 
Soggy fall, soggy spring
Standing corn and potential planting delays will steer market
by Dr. Robert Wisner
Keep a close watch on prices in the next several weeks for opportunities to boost marketings. Look for strength in old and new-crop corn prices from late March through early May as grain traders’ focus on weather, completion of harvesting 2009-crop corn in northern areas of the Midwest, and spring fieldwork progress. If you can arrange sales without interfering with fieldwork, consider increasing sales of both old and new-crop corn during this period. If you have farm-stored corn, consider sales for June/July delivery. Some of the best pricing opportunities of the year often come during this period, along with basis strength.
As we went to press, the stage is set for challenges to timely plantings for farmers in many areas this spring. That should be a supportive factor in corn prices for the next 6 to 8 weeks. Because of the extremely late harvest, fall fieldwork progress and fertilizer applications were sharply below normal. At the end of November, 21 percent of the nation’s corn crop was still not harvested and by mid December, a significant amount of corn was still in the field in some areas. Also, this winter’s heavy snowfall on already saturated soils means the weather will need to be quite favorable to get plantings finished on time.
Also watch for the March 31 USDA Planting Intentions and Grain Stocks reports. Both will be more important than usual this year. Many previously bankrupt ethanol plants are back online and a few more are expected to resume production in the next few months along with a handful of new plants. With those prospects, grain traders believe more corn acres will be needed this spring than a year ago. The market will need to buy those acres, and the cost could increase if plantings are delayed. The grain stocks report will give analysts a look at apparent feed and residual use of corn during the December to February quarter. Residual use reflects field losses that were not picked up in the Jan. 12 season final estimate, statistical errors and corn deterioration during storage. These factors could be quite significant this year since USDA’s final crop survey was taken when over a fifth of the crop was still un-harvested. Actual feed use should tend to be increased by this year’s lower test weights and other lower quality factors.
Dr. Robert Wisner is an agricultural economist at the Iowa State University Ag Marketing Resource Center. Dr. Ron Plain is a professor of agriculture economics at MU and longtime market analyst.
Wheat  Strong supply slackens price Stocks are at a six-month supply, depressing exports by Dr. Robert Wisner Watch for possible modest rallies in the next few weeks to boost marketings of old-crop wheat and new-crop that you’ll need to move at harvest. Planted winter wheat acreage is down sharply from a year ago but U.S. stocks are the largest in years and world stocks are substantial although not quite as burdensome as in the U.S. The best hope for strength in wheat prices would be indications of serious winter kill on wheat in Russia, the Ukraine, EU, or a late freeze on the U.S. crop. U.S. wheat carryover stocks are now expected to be equivalent to about a 25 to 26 weeks’ supply on June 1. In other words, that’s about a six-month supply, in contrast to the 6.9 weeks’ supply two years earlier when wheat prices reached all-time record highs. U.S. wheat exports have continued to be very depressed this season, with the soft red winter total only about half the year ago level as this is being written. Hard red winter wheat exports are only slightly better with a 42 percent decrease from last season. Our sharply lower exports reflect two years of much better foreign crops after severely reduced production in parts of the U.S. and several major foreign producing areas in 2007. Looking ahead two or three years, the stage may be set for some improvement in wheat prices but time will be required to work off excessive stocks unless unfavorable weather occurs sooner. Low prices will encourage more wheat feeding internationally and possibly in the U.S. this summer. In addition, U.S. plantings of soft red winter wheat for harvest this summer are reported to be down 29 percent from a year ago because of the late harvest and wet fields last fall. Hard red winter wheat plantings are estimated to be down 12 percent from last year. In Kansas, the No. 1 wheat producing state, acreage is estimated to be the lowest since 1957. |
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Soybeans 
There’s one hitch
The stars align for increased demand,
but South America will bring supply
By Dr. Robert Wisner
Watch for rallies in old and new-crop prices in late March and April for opportunities to boost marketings. Some of the best pricing opportunities of the year often occur at this time, as the trade worries about whether crops will be planted in a timely manner, whether this will be the year of the next big Corn Belt drought, or whether rains will be excessive and cause flooding problems. But don’t set your marketing sights too high. Several factors may temper planting-time price strength this year, including South America’s expected record new-crop harvest and wet Midwest fields that could delay corn plantings and push more acres into beans.
Export demand for U.S. soybeans and products has been strong so far this year, driven in part by last year’s lower South American crop and Chinese demand. China is leading the world’s economic recovery and its economic growth has led to increased demand for meat, eggs, fish and dairy products, all of which require soybean meal. Soybean oil is an important cooking oil in China, and higher incomes have supported oil demand there. In addition, both the Chinese government and consumers remember the sharp increase in soy and soy product prices in 2008. China has increased reserve stocks of soybeans as well as feed and food grains to temper impacts of a similar situation in the future. There also are reports that Chinese consumers have stocked up some on soy oil.
While demand has been strong, a big change in U.S. soybean and soybean product export demand is now on the horizon. That’s because of an expected record large South American soybean crop now being harvested. The final size is still uncertain but government and private estimates place the crop at more than 1.1 billion bushels above last season’s drought-reduced harvest. To put just the increase in perspective, it is equivalent to about 80 percent of U.S. marketing year soybean exports. Be prepared for a sharp drop in U.S. soybean exports from April through August. With favorable U.S. soybean crop prospects, that would be a strong caution sign for soybean prices from June through October.
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Cattle  A cycle's progress Fewer head to market will eventually bring higher prices; economy continues to blunt demand By Dr. Ron Plain The good news is that there are a number of reasons to expect higher cattle prices this year. Lower cattle prices in 2009 were not caused by an excess of beef on the market. Beef production in 2009 was down 2.6 percent compared to 2008. The primary problem for cattle prices in 2009 was weak demand, due in large part to the recession. Per capita beef consumption in 2009 was only 61.3 pounds, down 1.5 pounds from 2008 and the lowest since 1952. Both domestic beef demand and export demand were down in 2009. 500-550 lb.Steers Medium & Large #1, Oklahoma City |  |
People do not give up eating during a recession, but they do spend less money on food. The quickest way to cut your food bill is to eat away from home less and buy more food at grocery stores. Steak restaurants have been particularly hard hit during this recession. Lower expenditures force down the price of steaks and thereby the price of cattle. Ground beef prices have held up well, but you can’t maintain $100 fed cattle prices with ground beef. People also have to buy a lot of high-dollar steaks. Retail ground beef prices were 9 percent higher in 2009 than 2007, but choice sirloin steak was 2 percent lower. The recession is two years old and overdue for a funeral. A stronger economy and higher employment will boost meat demand and raise cattle prices. Unfortunately it looks like the economic recovery will be gradual and therefore an early jump in beef demand is not expected. The 2009 calf crop was 1.4 percent smaller than the 2008 crop and 3.8 percent smaller than in 2007. A smaller number of calves being born means reduced cattle slaughter down the road. The calf crop has declined for 12 straight years and is expected to decline for several more. Fed cattle slaughter weights were record high in 2009 which increases the odds weights will be down this year. USDA is forecasting U.S. beef production will be 1.5 percent lower this year than in 2009. Slightly over 10 percent of the U.S. beef cow herd was slaughtered in 2009. That level of culling should yield a cow herd this year that is 1 to 2 percent smaller than in January 2009. Obviously, fewer cows will mean fewer calves. Last fall’s corn harvest had a number of problems, but a lack of corn wasn’t one. The average yield for the 2009 corn crop was a record at nearly 163 bushels per acre resulting in the second largest corn harvest ever, 12.9 billion bushels. A large supply of corn should keep prices under $5 per bushel and help boost what feedlots are willing to pay for yearling steers. The summer rains that produced the huge corn crop also gave us ample hay. One thing cattle producers should be sure to check is feed quality. The abundant rains created some quality issues for both corn and hay. |
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