Yesterday, the U.S. Department of Agriculture released its quarterly Outlook for U.S. Agricultural Trade report, which stated that, “Fiscal 2013 agricultural exports are projected at a record $143.5 billion. Horticultural products are forecast up from the fiscal year 2012 forecast on strong demand from Canada, Europe, and Japan. Grain and feed exports are expected up, driven largely by higher wheat volume and value, but also supported by higher corn unit values. The forecast for oilseeds is up from 2012, based on record soybean and soybean meal prices attributed to tight exportable supplies. Cotton exports are forecast down on falling unit values. Exports of livestock, poultry, and dairy products are forecast marginally lower as declines in dairy, pork, and poultry outweigh growth in beef.
“U.S. imports are projected at $117 billion in 2013, up from the revised 2012 forecast of $106.5 billion. For 2012 tropical oils (coconut, palm, and palm kernel), olive oil, coffee and cocoa beans, sugar, and rubber have all experienced price declines as world demand has weakened. These downward price adjustments are expected to boost U.S. agricultural import volume in 2013.
“The forecast trade balance for fiscal 2013 shows a surplus of $26.5 billion, down $3.5 billion from the revised 2012 forecast. The revised trade surplus for 2012 is $30 billion.”
Agricultural Economy: U.S. Drought Impacts Persist
A news release yesterday from USDA stated that, “As the Obama Administration continues to support farmers and businesses impacted by the drought, Agriculture Secretary Tom Vilsack today announced a two-month extension for emergency grazing on Conservation Reserve Program (CRP) acres, freeing up forage and feed for ranchers as they look to recover from this challenging time.”
Yesterday’s release added that, “The Secretary today also designated 147 additional counties in 14 states as natural disaster areas-128 counties in 10 states due to drought. In the past seven weeks, USDA has designated 1,892 unduplicated counties in 38 states as disaster areas- 1,820 due to drought [related graph]-while USDA officials have fanned out to more than a dozen drought-affected states as part of a total U.S. government effort to offer support and assistance to those in need.”
Fifth District- Richmond– “Widespread precipitation since our last report helped revitalize crops and pastureland in many areas of the District. Rain in early August aided late summer peaches in Maryland and West Virginia, and soybeans were responding to improved weather conditions in Virginia. Cotton and peanut growers in the District are also having a great year. In South Carolina, the cantaloupe and watermelon harvest was virtually complete by early August. Results of our recent agricultural credit survey indicated that farmland values were above both the previous quarter and year-ago levels.”
Sixth District- Atlanta– “Recent rains improved conditions in many parts of the District. Compared with the same time last year, prices paid to farmers for soybeans, corn, oranges, beef, hogs, and broilers were up while cotton was down. Although beef prices have increased over the last year, contacts reported that both the drought and high feed prices have resulted in lower prices paid to farmers on a month-over-month basis.”
Seventh District- Chicago– “The drought has substantially reduced expected yields for corn and soybeans, although the impact varied considerably across the District. Scattered rains near the end of the reporting period helped revive soybeans to some degree; however, with the exception of some late- plantings, the precipitation was too late to improve yields for most of the corn crop. Crop insurance and higher prices will partially offset lost revenue. However, some farmers face the prospect of having to buy corn at market prices after selling ahead more than they will likely harvest. Livestock pastures are in poor shape as well, and fields with low corn yields were being chopped for silage to feed livestock. With feed costs high, livestock operations cannot cover their costs of production, and operators have reduced their herds accordingly. Hog and cattle prices were down from the prior reporting period, while dairy prices were up as milk production dipped.”
Eighth District- St. Louis– “Severe drought conditions have caused downgrades to forecasted crop production. Annual 2012 production of cotton, soybean, and corn in the District states is expected to fall from 2011 levels by 12 percent, 18 percent, and 24 percent, respectively. In contrast, annual production of rice and sorghum in the District states is expected to increase by at least 12 percent. The fraction of all crops rated in fair or better condition has fallen in all District states since the previous report. Similarly, the fraction of pasture rated in fair or better condition declined in all District states.”
Ninth District- Minneapolis– “The agriculture sector was mixed. Preliminary results from the Minneapolis Fed’s second-quarter (July) survey of agricultural credit conditions showed that nearly 90 percent of lenders said farm incomes increased or stayed the same in the past three months, with similar results for household and capital spending. While severe drought hit the Midwest, much of the District has been spared relative to other areas. Most of the corn, soybean and spring wheat crops in Minnesota and North Dakota were in good or excellent condition. South Dakota and Wisconsin fared somewhat worse. District cattle producers have been selling more animals because of high feed costs. Margins also tightened for dairy producers. Prices received by farmers in July increased from a year earlier for corn, wheat, soybeans, hay, dry beans, poultry, eggs, cattle and hogs; prices decreased for potatoes and dairy products.”
Tenth District- Kansas City– “Agricultural conditions deteriorated as crops withered under extreme drought. The majority of the corn and soybean crops were rated in fair or poor condition, cutting production estimates and sending crop prices to record highs. Drought strained profit margins for livestock producers as feed costs rose and further herd liquidations dampened cattle prices. Escalating production costs were expected to boost farm loan demand in the coming months. Agricultural bankers indicated ample funds were available for farm loans at historically low interest rates. Loan repayment rates were expected to hold near year-ago levels due in large part to crop insurance and higher land lease revenues for mineral rights. While still well above year- ago levels, farmland values rose less rapidly and were expected to hold steady during the rest of the growing season.”
Eleventh District- Dallas– “Drought conditions improved slightly due to scattered rainfall in July. Crops remained mostly in fair to good shape, with the exception of dryland cotton crop in the Texas High Plains region which suffered due to lack of moisture. Overall, crop conditions were much better than a year ago. Drought in the Midwest has caused grain prices to climb sharply, squeezing margins for ranchers by driving up feed costs for livestock.”
Twelve District- San Francisco– “The persistent drought in parts of the country has raised grain and feed prices, prompting District cattle ranchers to reduce herd sizes.”
USDA- Economic Research Service (ERS)- Farm Income Update
Yesterday, the USDA’s Economic Research Service (ERS) updated its 2012 Farm Sector Income Forecast, which stated that, “Net farm income is forecast to be $122.2 billion in 2012, up 3.7 percent from last year [related graph].”
The ERS summary noted that, “Extreme heat and dryness in the Plains and Corn Belt is drastically cutting projected U.S. corn and soybean yields for the 2012 harvest. Both U.S. corn and soybean supplies for marketing year 2012 are expected to be at 9-year lows.”
Yesterday’s update explained that, “Hit hard by the 2012 drought, U.S. corn production is expected to decline, leading to drops in exports and alcohol for fuel use in marketing year 2012. While the quantity of corn for grain sold in 2012 is expected to decline almost 7.4 percent, a forecast rise of $1.31 per bushel should boost annual receipts [related graph].
“Scorching heat and a prolonged drought is expected to result in the lowest soybean supply in 9 years. Soybean sales are expected to experience a significant rise in 2012 as an increase of almost $3 per bushel more than offsets an 8 percent decline in the quantity of soybeans sold [related graph].”
Agricultural Economy: Drought, Livestock Sector Profitability, and Production Issues
Purdue University Agricultural Economist Chris Hurt indicated yesterday (“Pork Industry Faces Record Losses”) that, “A tsunami of red ink is about to wash across the pork industry which is facing losses unseen even in the fall of 1998 when hog prices at times approached zero value. The stressors include: more hogs than expected, rapid sow liquidation now underway, and record feed prices. Losses in the final quarter of this year could be $60 per head, exceeding the previous record quarterly losses of $45 per head in the fall of 1998.”
After additional analysis, Dr. Hurt noted that, “Financial losses of the magnitudes projected here will cause massive erosions of family equity and some bankruptcies. Unfortunately losses in 2008 and 2009 were not fully recovered by the profits in 2010 and 2011 so that some producers face this tsunami in weakened financial condition. Family hog farms with a sizable land base will have land equity to draw on. Larger hog producers with a minimum land base will need to draw on corporate equity and then their lenders. Lenders will make the final decisions for the weakest, but will strive to keep companies in operation as they seek new buyers. This means that another round of consolidation of ownership can be anticipated.
“Unfortunately, individual producers are going to need to find their own way through the short-term carnage. The irony is that hog production may return to profitability by mid-summer 2013 when meal prices begin to moderate, hog prices move to record highs, and rain and reasonable temperatures bless our nation’s corn and soybean fields once again.”
John D. Sutter reported on Saturday at CNN Online that, “Triple-digit temperatures and sparse rain this summer produced one of the most severe and widespread U.S. droughts in a half-century. Most headlines have focused on the extent of the drought — the fact that it enveloped more than half the country; or that temperatures in July were the hottest for any month on record in the continental United States. Somewhat lost in that national conversation are the stories of [Missouri dairy farmer Mark Argall] and other small-scale farmers who are being pushed out of the only line of work they’ve ever known.
“For them — and for the rural communities that depend on their incomes — the drought is far more than a news item. It’s an earth-shattering event, one they worry could lead the dairy communities of southern Missouri to unravel.
“And, perhaps saddest of all, farmers say the sell-offs could have been avoided.”
A CNN Online update today, which included the short video below, provided a look at how the 2012 U.S. drought has impacted dairy producers in Missouri.
This summer has challenged the faith and optimism of many farmers suffering through the drought, the CNN update provides a closer look at the toll the adverse weather conditions have had on producers and their families.
A recent news report (Aug. 23) from KTIV-TV (Sioux City, Iowa) included recent remarks on the 2012 Farm Bill from Sen. Chuck Grassley (R, Iowa), Sen. John Thune (R., S.D.), and Rep. Kristi Noem (R., S.D.).
The lawmakers stressed the importance of getting the Farm Bill passed before it expires on September 30th.
Ron Nixon reported today at The New York Times Online that, “The Agriculture Department said Friday that consumers can still expect higher food prices next year, but the expected increase was unchanged from last month, even as extreme heat in the Farm Belt continues to reduce the grain harvest and increase feed prices for livestock.
“According to the latest Agriculture Department consumer food price index, overall food prices are expected to increase 3 to 4 percent next year largely because of the drought, the same as last month’s forecast.
“‘The data out this morning shows that nothing much has changed,’ said Ephraim Leibtag, deputy director of research at the Economic Research Service at the Agriculture Department. The price of beef and veal will see the largest increases next year, the report said, almost entirely because of higher costs for feed, which is made from corn and other grains. Beef and veal prices are expected to increase 4 percent to 5 percent.The most immediate impact of the drought will be seen in poultry prices, the government predicted.”
Mr. Nixon added that, “Ironically, the Agriculture Department said the reduction in the number of cows could result in a temporary decline in beef prices this year as a surplus of cattle is sold and more meat enters the market.”
“A government estimate released earlier this month said that because of worsening drought conditions, farmers would produce about 10.6 billion bushels of corn this year, down from what was projected at the beginning of the year to be a record 15 billion bushels. The reduction in corn and soybean supplies has pushed up their prices to record levels,” The Times noted.
Click on the summary table below for an expanded view of the updated ERS data:
Meanwhile, Bloomberg writer Alan Bjerga reported last night that, “U.S. consumers, already paying more for food due to the worst drought in five decades, may soon see prices at the supermarket rise further because of fuel costs.
“‘Gasoline is the wild card’ of food inflation, said Chad Hart, an economist at Iowa State University. ‘Anytime you have oil and gas prices moving up, that will hit us on the food dollar.’
“Energy and transportation accounts for about 8.2 cents of each dollar spent on food, compared with about 4 cents for farm commodities, according to the U.S. Department of Agriculture. Processing, labor, packaging and other costs dominate the retail and restaurant prices of food, making the cost of corn less important to consumers than the price of the gas needed to transport it, according to USDA data.”
The New York Times has provided a very useful interactive graphical display at the paper’s webpage on the 2012 drought, “Drought Extends, Crops Wither.”
Time Times update noted that, “This summer’s heat and rainlessness, which rivals the devastating 1988 drought, has left crops withering in the fields and farmers trying to calculate their losses. An analysis by The New York Times looks at the widely varying effects of this summer’s heat and drought on crops critical to the nation’s farm economy.”
To view the complete interactive graphical feature from the Times, just click on this link.
The Associated Press reported yesterday that, “The nation’s most withering drought in decades only got worse in several key farming states last week, despite cooler temperatures that at least gave those living there a break from this summer’s stifling heat, according to a new drought report released Thursday.
“In its weekly map, The U.S. Drought Monitor showed that as of Tuesday, just over two-thirds of Iowa, the nation’s biggest corn producer, was in extreme or exceptional drought — the worst two classifications. That’s up more than 5 percentage points, to 67.5 percent, from the previous week.
“Nearly all of Nebraska, Kansas, Missouri and Illinois are in extreme or exceptional drought, with Illinois showing the most-dramatic climb in those categories, spiking 17 percentage points in one week, to 96.72 percent, according to the map. In neighboring Indiana, where 5 inches of rain fell in some parts, the area of the state in exceptional or extreme drought fell 9 percentage points, to 37.09 percent.”
Damian Paletta and Sara Murray reported in today’s Wall Street Journal that, “The U.S. economy likely would slide into a ‘significant recession’ next year if Congress doesn’t avert tax increases and spending cuts set to begin in January, the Congressional Budget Office said Wednesday.”
This Wall Street Journal video explains more:
See also this interactive graphic from the CBO (click on graph to expand):
Whether the House and Senate are able to resolve the Farm Bill before the end of September, or if the legislation gets pushed into consideration after the election, issues related to budget sequestration and the “fiscal cliff” could become increasingly important.
Ramsey Cox reported on Tuesday at The Hill’s Floor Action Blog that, “Sen. Kent Conrad (D-N.D.) told constituents Monday that he and a bipartisan group of seven senators are still working on a plan to greatly reduce the national deficit and avoid the looming ‘fiscal cliff.’
“‘A lot of important behind-the-scenes work is being done now on the key elements of a comprehensive, balanced and bipartisan long-term fiscal plan,’ Conrad said. ‘While our small group consists of four Democrats and four Republicans, upwards of 40-plus Republican and Democratic Senators are supporting and encouraging our efforts to reach a balanced agreement that includes entitlement changes, tax reform and additional spending cuts.’”
Yesterday’s update added that, “On Monday, [Sen. Conrad] said that the pressure to avoid the fiscal cliff could help prompt lawmakers to take action to avoid the situation by passing a comprehensive plan.”
Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “Members of some major farm groups have been sporting buttons ‘Farm Bill Now’ for weeks, but 39 organizations on Wednesday rolled out their official push as a coalition to demand Congress pass a five-year farm bill before the programs expire in September.
“Lawmakers are meeting for eight days in September, starting on the 10th. The Senate has passed a version of the bill, but the House has not. It’s an understatement to suggest that getting a farm bill done by the end of September would be a monumental task.
“Today, the group issued the following statement, titled ‘Why We Need a Farm Bill,’ on the importance of new farm legislation for America’s farmers.”
Ben Dunsmoor reported today at Keloland Television Online that, “The stalled Farm Bill took center stage as South Dakota Congresswoman Kristi Noem and Democratic challenger Matt Varilek squared off in their first debate Wednesday at Dakotafest in Mitchell.”
UPDATE– (“Noem, Varilek debate farm bill“) by David Montgomery, posted Wednesday at the Argus Leader Online stated that, “Democratic House candidate Matt Varilek hammered Rep. Kristi Noem over the stalled progress of the farm bill at their first debate Wednesday.
“But Noem swung right back, accusing Varilek of supporting expansive government and a cap-and-trade program.”
The article added that, “[Varilek] repeatedly returned to the farm bill, accusing Noem of not supporting an effort to force a vote and of not being vocal at meetings of the House Agriculture Committee.
“‘We might not be in this situation if my opponent had been more focused on ag issues longer ago,’ Varilek said.”
Mr. Montgomery noted that, “Noem defended her record, arguing she was working hard to pass a farm bill and it was the fault of Congressional Democrats the bill hasn’t yet passed. She accused Varilek of lying and making up facts.
“‘There was so much spin in that story that Matt almost fell out of his chair,’ Noem said after Varilek criticized her position on forcing a vote on the farm bill. While Noem chose not to lead that effort, she said Wednesday she plans to support it if there’s still no progress when Congress reconvenes in September.”
Marc Lifsher reported in today’s Los Angeles Times that, “Major food growers and processors are pumping millions of dollars into an increasingly hefty war chest to fight a November ballot measure that would require labels on genetically engineered foods. In all, they’ve collected $25 million, the most for any ballot initiative this fall.
“Anticipating the need for a high-dollar media campaign to fight the measure, agribusinesses, biotech corporations and manufacturers of some of the bestselling grocery products are bankrolling the effort.
“Details of the campaign remain secret, but public reports of campaign finances show that contributions have more than doubled in the last week. Although the No on Proposition 37 campaign’s biggest expense thus far has been about half a million dollars for political consultants and media experts, campaign officials said a major advertising campaign is in the works.”
In addition, today’s LA Times article included this graphical summary (click on the image for full, complete view):