Market Watch

Corn prices continue to be supported by expectations that the USDA will reduce the forecast size of the 2010 U.S. crop and by a rapid pace of ethanol production. The rate of exports and export sales has been somewhat disappointing, according to University of Illinois agricultural economist Darrel Good. "Reported expectations for the Nov. 9 USDA Crop Pro duction report are for a slightly lower yield and production forecast, with the average yield guess reported at 154.4 bushels. The October forecast was 155.8 bushels. A smaller production forecast without any change in the consumption forecasts would further reduce the expectations for the size of year-ending stocks." A 114-million-bushel reduction in the forecast of crop size, as implied by a yield of 154.4 bushels, would reduce the projection of year-ending stocks to 788 million bushels or 5.8 percent of projected consumption. Ethanol production during the first nine weeks of the 2010-11 corn marketing year averaged 36.344 m...

Last week, cattle feeders held out for higher money and, rather unexpectedly, got it on a relatively light volume of cattle. The futures market was apparently caught a little off guard by the roughly $1.50 higher cash cattle prices, and nearby Live Cattle futures raced to catch up, adding over $2 in Friday’s trading. Higher fed cattle prices were supported by stronger wholesale beef prices. The Choice cutout added almost $2 over the course of last week, ending up at $154.68 on Friday. Feeder cattle futures also gained back some ground on Friday as the corn market took a breather from its recent rally. Cash calf markets were hit pretty hard last week, though, with prices (especially on stocker cattle) dropping in response to the prior week’s corn market shock. At Oklahoma City, feeders were called $2 to $3 lower while stockers were called $5 to $8 lower. Sources: John Michael Riley, Ph.D., Asst. Extension Professor, Department of Agricultural Economics, Mississippi State University...

December 2010 corn futures traded to a high of $5.235 on September 27 and closed at $5.05 on Sept. 29. On Oct. 4, the surprisingly large USDA Sept. 1 corn stocks estimate released on Sept. 30 sent that contract to a low of $4.56, said University of Illinois agricultural economist Darrel Good. Similarly, the November 2010 soybean futures contract traded to $11.295 on Sept. 27, closed at $10.99 on Sept. 29, and declined to $10.44 on Oct. 4, he said. "Price declines came to a halt with the release of USDA's October Crop Production report on Oct. 8. That report contained a unexpectedly small forecast of the size of the U.S. corn and soybean crops," he said. The corn crop is now forecast at 12.664 billion bushels, 496 million smaller than the September forecast and 446 million smaller than the 2009 harvest. Although the estimate of harvested acreage was increased by 258,000 acres, the forecast yield was lowered by 6.7 bushels, to 155.8 bushels, he said. "The decline from ...

In the October 8 2010 Crop Production and World Agricultural Supply-Demand Estimate (WASDE) reports, the USDA made changes in its supply-demand projections that have strong positive impacts on U.S. and World feedgrain price prospects, as well as positive direct and cross-crop market effects on soybean and wheat price prospects. Market Implications for U.S. Corn and Grain Sorghum: Projections for MY 2010-11 of U.S. corn ending stocks below 1 billion bushels (902 mb) and % stocks-to-use of 6.7% (nearing historic lows of 5% in MY 1995-96) provide strong supply-demand support U.S. corn and grain sorghum prices for the remainder of 2010 and into 2011. With improved U.S. cash corn price projections for MY 2010-11 in the $4.60 to $5.40 /bu range, it is likely that price rationing will have some impact on feedgrain use. MY 2010-11 appears to be a “short crop” marketing year for U.S. corn and other feedgrains. If a typical short crop corn price pattern emerges in MY 2010-11, then s...

The USDA's September Grain Stocks report indicates that the corn that went missing in June was found in September. The USDA's June 1, 2010 corn stocks estimate released on June 30 showed a surprisingly small inventory of corn. That estimate helped ignite a three-month rally in corn prices, says University of Illinois agricultural economist Darrel Good. "At the time of its release, the June corn inventory estimate created a lot of discussion about what happened to the 250 million bushels of corn that had gone missing. The small stocks estimate resulted in a very large estimate of feed and residual use of corn during the third quarter (March - May 2010) of the 2009 -10 marketing year." That large estimate resulted in the USDA increasing the projection of feed and residual use for the entire marketing year by 175 million bushels, to a total of 5.525 billion bushels. And that projection appeared to be unrealistically large but was maintained in the balance sheet through S...

Hog producers were ready to expand this fall. That may have been appropriate when 2010 corn prices were expected to close at $3.50 in early July, but that is no longer an acceptable conclusion with expectations closer to $5.00, according to Purdue University Extension economist Chris Hurt. "Higher corn prices will cut margins over the coming 12 months, but hog producers can now avoid an expansion that would plunge margins deep into the red in late 2011 and 2012," he said. "The clear message for the industry is: Don't expand and margins will be okay. The other important message is: The next two years will not be a repeat of the large losses of 2008 and 2009," he added. Fortunately, the September USDA survey indicates there are no signs of expansion yet. Producers report they have 2 percent fewer animals in the breeding herd than a year ago, he said. The primary story is in North Carolina where breeding herd numbers were down 110,000 head over the past year. In fa...

The fed cattle market was steady to a little higher this past week. Trade took place mid week with decent volume. Prices were mostly $97 on a live weight basis and were $152-154 on a dressed basis. Choice boxed beef prices were down more than $2 this week. The Choice-Select spread decreased slightly and remains at the typical level. Feeder cattle prices were steady to lower this past week compared to last week’s prices. Montana prices were steady for 750 and for 550 pound steers. Nebraska prices were $1 lower for 750 and $4 lower for 550 pound steers. Oklahoma prices were $1.50 lower for 750 and $2.50 lower for 550 pound steers compared to last week. Corn prices were a $.21 higher per bushel than last week. Dried Distillers Grain prices were $7 per ton higher and wet distillers grains were priced a little higher in Nebraska for the week. Source: Livestock Marketing Information Center Farm Supply Beef Artwork: Cattle Feedlot

As Nebraska winter wheat growers head to the field, the markets continue to move in their favor and marketing the 2011 crop should be on their minds. The cash market for winter wheat to be delivered in July 2011 has remained above $5.50 per bushel for the past month. For those producers interested in forward contracting winter wheat and carrying proper crop revenue insurance coverage, this may be a good time to contact the local elevator. The 2010 UNL Crop Budgets show cash cost for wheat production to be near $2.25 per bushel for both irrigated and dryland production. Total costs for irrigated winter wheat are near $3.40 per bushel, and dryland costs are between $3.50 and $4.00 per bushel depending on the production system. Armed with this information, the $5.50 and higher prices that we see right now allow farmers to lock in a reasonable profit for the 2011 crop prior to putting it in the ground. Looking back over the past ten years, this will be the fifth year that the...

Georgia's tobacco and pecan crops are on pace for a surprisingly good year, but above-normal temperatures have taken a toll on peanuts and cotton. Pecan trees are alternate-bearing, meaning they produce a full crop every other year; most trees in Georgia are on the same cycle and this was supposed to be an "off" year for pecan production, but Georgia farmers will likely produce 75-80 million pounds, double what has been produced in other off years. Extreme heat in July and early August hurt peanut plants' ability to set peanut pods. Yield is expected to be 3,300 pounds per acre, or 7 percent less than last year. [ University of Georgia Cooperative Extension ]

USDA released its August Cattle on Feed report last Friday, reporting its inventory estimates for feedyards with 1,000+ head capacities. Net placements of cattle on feed during July, at 1.706 million head, were down 6.3% compared to last year, marking the first month since February to see a reduction in placements relative to 2009. While July placements were still 1-2% higher than what the trade expected prior to the report’s release, it did confirm that the sharp increase in placements during May and June slowed last month. Part of this percentage decline in placements relative to a year ago is a function of Summer 2009 placements. Last year, May and June placements were down sharply and July placements were above the 5-year average. Thus, larger placements this May and June and smaller July placements would be expected just for average placements. Feedlot profitability and grass conditions have also driven this summer’s placement pattern. Good feedlot returns following the rally ...

A very solid June performance allowed U.S. pork and beef exports to finish the first half of 2010 with strong momentum. According to statistics released by USDA and compiled by the U.S. Meat Export Federation (USMEF), pork exports of 164,000 metric tons (361.6 million pounds) were 24 percent higher than June 2009. Pork export value was $316.4 million, up 34 percent. June beef exports were 25 percent above year-ago volumes, totaling 96,578 metric tons (212.9 million pounds), while the value in June was up 37 percent to $377.6 million. For the first six months of the year, pork exports were 3 percent above their year-ago pace in terms of volume (951,803 metric tons or 2.1 billion pounds). But with much-improved pork prices, export value was nearly 10 percent higher at $2.35 billion. This is slightly higher than the value reached in the first half of 2008 ($2.32 billion), the year in which pork export value set an all-time record. Export value per head during the six-month period was mor...

A long period of low milk prices will likely accelerate dairy-farm consolidation in Pennsylvania, according to an industry expert in Penn State's College of Agricultural Sciences. Chad Dechow, associate professor of dairy cattle genetics, sees the United States dairy industry migrating more toward the hog industry model. A sizable contingent of small farms that can produce milk cheaply, rely on nonfarm income sources, or incorporate a niche market will remain. The majority of milk, however, will be produced by a limited number of very large operations with several thousand or more cows spread across "satellite dairies." "We are likely to see fewer single-site, large-family dairies," he said. "Much of this consolidation in Pennsylvania will come from large family dairy farms that continue to grow and some operators may come from Western dairies that purchase satellite dairies farther east." "Unfortunately, some 1,000-cow operations that would have ...

The prices of wheat and soybeans have been trending lower since late April and early May. Corn prices declined sharply last week. After moving to near $5.15 in early May, July 2010 wheat futures at Chicago are now near $4.35. Similarly, November 2010 soybean futures spiked to about $9.85 in late April and are now under $9.00, the lowest since last fall. December 2010 corn futures traded in a fairly wide sideways pattern during April and May, with a spike to just under $4.00. That contract is now near $3.55, the lowest since early September 2009. Recent price declines for all three crops continue the general downward trend that began in January 2010. "A record pace of consumption of U.S. corn and soybeans during the current marketing year and prospects for a much smaller U.S. wheat harvest in 2010 provided some price support earlier in the year, but are now overshadowed by other factors," said University of Illinois agricultural economist Darrel Good. "Crop prices have be...

December 2010 corn futures traded to a high of $3.95 in mid-April, retreated to a low of $3.67 early last week, and then rallied back to $3.95. The current price is about $.40 above the contract low established in early September 2009 and about $.75 below the high reached in early June 2009. The contract high, reached in mid-2008, is over $7.00. According to University of Illinois agricultural economist Darrel Good, weakness in corn prices starting in mid-April primarily reflected supply considerations: generally favorable weather for planting, expectations that acreage could exceed March intentions, and expectations that the 2010 yield would be above trend value due to a majority of the crop being planted early. "The current strength in corn prices reflects more favorable demand prospects," Good said. "There is a fair amount of optimism about corn demand in each of the three major categories of consumption." Recent data confirm increasing production and consumption...