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Weather continues to drive crop, livestock markets

By Jennifer Carrico


SHOWING—Exhibitors from all across the country traveled to the World Pork Expo in Des Moines, Iowa, to compete for championships in several breeds.

Weather and markets are two very important factors for livestock and grain farmers throughout the country.

Iowa State University climatologist Elwynn Taylor said in 2011 every state had temperatures over 100 at some point, which hadn't occurred for quite some time.

"We've had a strange past year as well as a strange past two months. The Corn Belt has experienced warmer than normal temperatures, which is expected to stay with us for several months as a major weather pattern is divided by the Continental Divide," he said.

When that type of weather pattern has been seen in the past, it has caused few changes in the weather for an extended amount of time. March was the warmest in history with temperatures often 30 degrees warmer than normal.

"We have seen a La Nina weather pattern in 2012, with one week of warm temperatures, followed by one week of cool temperatures," said Taylor. "We expect these extremes to continue throughout the year."

A consistent increase in corn yield has ben seen over the past 16 years, which was preceded by 25 years of high variability, which Taylor said seems to be the normal cycle. With this yield variability, prices have been variable too.

Currently, the seasonal price of corn is higher than the cost per bushel, $5.42 per bushel selling price versus $4.47 per bushel cost. However, he doesn't expect this to continue. These prices have been within a nickel from 1972 to 2011.

With continual warm days and cool nights, corn filling is extended. Warm days and warm nights shortens corn development.

Taylor said while the actual yields for corn were 5 bushels per acre lower than anticipated in 2011, the estimates were based on having average weather through harvest time.

"Having average weather rarely happens. Each year mid-July is about the most important time of year for the corn crop. Last year that was the period of time when there were extremely hot temperatures in a good portion of the Midwest," he said. "Whenever temperatures are above 93 degrees, it is a disadvantage for the corn crop yield."

The La Nina weather pattern will continue to cause wet weather in the northeast and dry in the southern states. Taylor expects 2012 to be dry in eastern Iowa and wet in western Iowa, which is the opposite of what normal weather patterns show.

Taylor's a bit uncertain of what should be expected for yields for 2012, as the weather has been so uncertain.

"There's a chance for record high yields this year, but there's also a chance for drought," he said. "It's easier to predict by July 4."

Markets

Along with uncertain weather patterns, markets have been up and down moving with the weather.

Steve Meyer, president of Paragon Economics said grain prices have moved into a new era. "We won't see corn prices stay at $8 per bushel, but we also won't see it go back down to $2 per bushel."

He said there continues to be a link between grain and oil. In 2010, a lot of corn was made into ethanol because it was profitable to do so. In 2011, those profits weren't as good, which shut some of the plants down. Meyer said that should help push prices back up.

In 2010, there was a tremendous growth in exports of ethanol to Brazil, the EU and Canada. While E15 production is approved, very few retailers are accepting it and instead are staying with the E10 blends.

Meyer expects an increase in feed demand for corn as hog numbers are slowing growth and lower cattle on feed numbers

Growth for the grain markets are expected in the areas of exports and carry-out stocks. Meyer expects the stock to use ratio to be tight for 2012.

Lots of exports are currently going to China, who was once a major exporter of corn. They are now a major importer of corn, which he said could be changed if they would embrace the advances in technology.

"The U.S. is still the driver of the corn market," Meyer added.

The weather continues to be a major concern for grain farmers. While the past two years haven't been as bad as 1983 or 1988 for lack of rainfall, this year has started to look like it could be a problem.

The average price for corn is expected to be $4 to $4.60 per bushel, but with a drastic change in weather, prices could be affected.

"Iowa has had the fastest corn planting ever and has had good emergence, but we will need rain for the crop to continue to be good," he said.

USDA yield estimate for 2012 are 166 bushels per acre. Stocks on March 1 were the tightest in four years. Meyer said the weather is definitely the factor for yield this year.

Soybean stock to use ratios are currently very high. The demand from China for soybeans continues to be great. With fewer acres of soybeans planted in 2012, Meyer said prices will stay between $12 and $14 per bushel.

Livestock markets

Meyer said the key to good markets for meat is how good the domestic demand is. Even with all the pressures the industry has faced in the past year, consumer demand continues to stay strong. Retail prices continue to be at record highs.

For 2012, pork production is up 2.2 percent over the previous year and beef production is down 2.9 percent. Broiler production is down 5.2 percent, but turkey production is up 2.3 percent. Meyer said all of these numbers show meat production is down 2.3 percent, while exports continue to increase.

Pork exports for 2011 were up 23 percent and for the first quarter of 2012, they have been up 17 percent over the previous year.

Beef and veal exports for 2011 were at record highs, Meyer expects those numbers to come down for 2012 as there will also be lower supplies through 2014.

"There was a 3 percent decline in the beef herd in 2011. It takes a while for that to bounce back," he said. "With good weather in Texas and Oklahoma, it will take two or three years to get that inventory back."

Cattle prices are expected to continue to be at record highs for the rest of the year and continue to be strong until the beef herd is rebuilt.

The March USDA Hogs and Pigs report showed lower farrowing intentions, but a continual gain in the litter size. Pork production for 2012 is expected to increase about 3 percent from the previous year, which showed a 2.2 percent increase from 2010.

He expects hog prices in August to be in the range of $90 to $94 per hundredweight and to average $86.40 per hundredweight for the year.

Jennifer Carrico can be reached by phone at 515-833-2120, or by email at jcarrico@hpj.com.

Date: 6/25/12



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