Yesterday, the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri provided an update on crop price projections reflecting information available in mid-October.
A summary of the FAPRI update indicated that, “The projected corn price for the 2014/15 marketing year was reduced slightly this month, to $3.40 per bushel. The record U.S. corn crop got even bigger in USDA’s October estimates, and carry-in stocks were also greater than had been estimated in September.
“Corn acreage could decline in 2015, and more typical growing conditions would result in lower yields next year. Projected prices increase to $3.74 per bushel for 2015/16, and to $4.20 per bushel by 2018/19.”
Yesterday’s update added that, “USDA soybean production estimates also increased slightly this month, but this was offset by a reduction in carry-in stocks, leaving total supplies marginally reduced from September estimates. The projected 2014/15 soybean price is little changed from last month, at $9.95 per bushel.
“Soybean acreage could stay near this year’s record in 2015 and the resulting large soybean supplies cause projected 2015/16 prices to drop to $8.93 per bushel, before recovering to $10.50 per bushel by 2018/19.”
Bloomberg writer Lydia Mulvany reported yesterday that, “Corn futures rose for the third time in four days as rains delay the harvest of a bumper crop in the U.S., the world’s top producer. Soybeans and wheat gained.
“Heavy showers made fields too wet for reaping in parts of the Midwest with as much as six times the amount of normal rainfall for October in the south-central Corn Belt, according to Martell Crop Projections in Whitefish Bay, Wisconsin.”
The Bloomberg article noted that, “Corn futures for December delivery advanced 1.4 percent to close at $3.5225 a bushel at 1:15 p.m. on the Chicago Board of Trade…Soybean futures for November delivery rose 1.5 percent to $9.665 a bushel.”
Zach Evans reported earlier this week at the Evansville (Ind.) Courier & Press that, “A summer with cool temperatures and well-timed rains have contributed to what will be a plentiful — and likely record — corn harvest for Southwestern Indiana farmers this autumn. But with a bountiful harvest, low crop prices and stagnant production costs, the economic outlook for farmers is far from rosy.
“Soybean and corn prices are the lowest they’ve been in five years. Agricultural economists estimate income for farmers could drop by 25-30 percent this year.”
The article noted that, “Adding to farmer’s concerns this season, a larger yield means increased storage costs, higher transportation costs and greater costs to dry grain.”
A news release yesterday from Purdue University indicated that, “Indiana’s projected record corn and soybean crops will likely result in backups at the state’s grain handling facilities and delay some farmers from harvesting, Purdue agricultural economist Chris Hurt says.
“‘When the grain industry hits its maximum drying or storage capacity, harvest has to slow down to allow dryers to catch up and to move more grain out of storage toward end users,’ Hurt said. ‘This forced slowdown of harvest activity generally occurs during the last half of corn harvest, which will likely be in late-October and the first half of November this year.’”
The update pointed out that, “Demand for storage will exceed capacity by about 100 million bushels across the state, the most excess demand for storage since the fall of 2007, Hurt said.”
In more detailed reporting on storage issues, DTN writer Emily Unglesbee noted yesterday that, “Pete Pistorius saw the beginnings of a bumper crop budding in his cornfields in central Illinois as early as June and July.
“In preparation, he bought enough white, polyethylene bags to store 450,000 bushels worth of grain and the equipment to load and unload them on the corn and soybean operation he runs with his father and brother-in-law near Blue Mound, Ill.
“Now, as he slogs toward the halfway mark of his harvest in mid-October, the investment appears to have been a wise one.”
The DTN update noted that, “Grain storage bags range in size by manufacturer, but [Purdue University agricultural and biological engineering professor Klein Ileleji] said most can hold between 8,000 and 12,000 bushels. Pistorius’ bags can each hold up to 15,000 bushels.
“Prices usually fall between $600 and $900 per bag, with an overall average cost of $0.07 a bushel, Ileleji estimated.”
In addition, USDA’s weekly Grain Transportation Report stated yesterday that, “The amount of grain production and grain stocks expected to exceed permanent grain storage capacity this harvest season has increased to an estimated 952 million bushels (about 5 percent of the expected U.S. record fall harvest). The storage shortfall is expected to impact eight States, which include, in decreasing order of storage capacity shortage, South Dakota, Indiana, Missouri, Illinois, Nebraska, Kentucky, Michigan, and Ohio (see figure). This shortfall estimate is up 37 percent from the September 4 estimate of 694 million bushels and is 18 percent more than the 2010 storage capacity shortage of 805 million bushels. A 50-percent increase in estimated old crop corn in storage on September 1 compared to last year at the same time and a slight rise in estimated record fall crop production contributed to the worsening estimation of the lack of grain storage capacity. Some of the impact could be mitigated by temporary storage; under special circumstances with unusually large crops, USDA sometimes allows emergency and temporary storage of grain that is under government loans, with the storing entity continuing to be financially responsible for the quantity and quality of the grain.”
Yesterday’s report added that, “This year’s fall harvest is expected to be challenging because of rail service delays, a bumper crop, and limited storage. Rail service delays are expected to continue because of brisk competition for limited rail capacity from oil, coal, intermodal, and automobiles, resulting in rail congestion. These rail service delays also are expected to continue adding to the cost of moving this fall’s harvest, which is expected to reach a record 18.8 billion bushels.”
Meanwhile, Reuters writer Rod Nickel reported yesterday that, “U.S. farmers are cutting back on spreading fertilizer this autumn in response to a drop in crop prices to multi-year lows and a delayed harvest, dealers say, warning of a pullback that will be felt from grain markets to Canadian potash mines.
“Ten of 12 U.S. farm retail companies surveyed by Reuters say fertilizer sales this autumn are lower than they were last year. The dealers, which span the country’s main growing areas, sell fertilizer, seed and chemicals.”
With respect to livestock issues, Bloomberg writer Megan Durisin reported yesterday that, “Hog prices slumped to a nine-month low as supply concerns eased and record-high costs for pork chops and bacon eroded prospects for demand…U.S. pork output will gain 5.1 percent to 23.94 million pounds next year, the USDA said in an Oct. 10 report.
“Increasing hog output may help to temper rising meat costs. Consumer pork prices are expected to jump 7.5 percent to 8.5 percent this year, the largest gain of any food group after beef, the U.S. Department of Agriculture forecasts.”
And Lucy Craymer reported yesterday at The Wall Street Journal Online that, “U.S. consumers’ love of hamburgers is having an unpalatable side effect halfway across the globe in New Zealand: higher beef prices.
“Retail prices for the meat have climbed 2.3% in the past year, as local farmers ship more beef overseas to make up for shortages in the U.S. Butchers and other meat vendors warn prices could spike as much as 20% during the last few months of the year as exports continue rising.”
The Journal article pointed out that, “The chief cause of the price rise is a prolonged drought in the Great Plains, in the interior U.S., which has pushed down the nation’s cattle supply to a six-decade low. Beef production in the country fell almost 6% between January and August this year, said agribusiness lender Rabobank in a quarterly industry update.
“That has forced Americans—who eat more beef than anywhere else in the world, accounting for 16% of global consumption—to look further afield to feed their love of burgers and steaks.
“The shortage has been worsened by rising demand from China and Indonesia, as well as record-high cattle-slaughter rates in Australia over the past two years that have reduced available livestock considerably.”
Also, Lynn Hicks reported on the front page of yesterday’s Des Moines Register that, “Every year, about 250,000 chicks make a 7,000-mile journey from central Iowa to China.
“The migrations begin at a hatchery in Perry, where crates of day-old chicks travel by roller-bed truck to airports in Chicago or Indianapolis, then by Air China or Federal Express plane to Beijing or Shanghai. Then it’s back on the road to breeding farms in places like Handan, in Iowa’s sister state of Hebei.
“Their progeny will end up in egg-laying operations all over China, the world’s largest egg producer.”
The Register article noted that, “Hy-Line International, based in West Des Moines, is a quiet company with a global impact. Its central Iowa research farms produce chicks that will grow up to be ‘grandparents’ to laying hens prized for their productivity and hardiness. Hy-Line breeds chickens to thrive in places as varied as Colombia, France, Australia and India.
“The company estimates that 40 percent of the laying hens in the world come from its genetic lines.
“Hy-Line is positioning itself to have a greater role as China’s egg industry moves from 10,000-hen farms to U.S.-style operations of 1 million birds or more. It’s supplying not only chicks, but also technical expertise to help customers like the Handan-based Huayu Group expand.”
In other news, Reuters writer Chris Arsenault reported yesterday that, “Despite renewed interest in industrial agriculture by investment banks and sovereign wealth funds, more than 80 percent of the world’s food is still produced by family farmers, according to new U.N. research published on Thursday.”
Likewise, an update earlier this week from USDA’s Economic Research Service (ERS) chart of the day indicated that, “Under the ERS definition, family farms represent 97.6 percent of all U.S. farms and are responsible for 85 percent of U.S. farm production [related chart].”
More broadly, DTN Ag Policy editor Chris Clayton reported yesterday (link requires subscription) that, “Global agricultural productivity isn’t increasing fast enough to meet the growing demand in the coming decades, the Global Harvest Initiative concluded in its latest report.
“The consortium made up of some of the world’s largest agribusinesses and conservation groups released its fifth-annual Global Agricultural Productivity report on Wednesday at the World Food Prize Symposium. The report sounds alarms over trends in production globally compared to population trends through 2050.
“‘If the latest trend continues, the world may not be able to sustainably supply enough food and other agricultural goods to meet exponentially growing demand in the next three decades,’ the report concludes.”
AP writer David Pitt reported yesterday that, “Financial aid and global coordination are needed to prevent the Ebola health care crisis from becoming a food emergency, agriculture ministers from West African nations at the center of the Ebola outbreak said Wednesday.
“In Sierra Leone, where thousands are infected and more than 900 have died, 40 percent of the farmers have abandoned their fields, said Joseph Sam Sesay, minister of agriculture, forestry and food security.”
“Liberia Agriculture Minister Florence Chenoweth says billions of dollars of outside agricultural investment is gone because farming has been decimated,” the AP article said.
And regarding recent trade developments, Doug Palmer and Adam Beshudi reported yesterday at Politico that, “U.S. and Japanese officials will meet again next week in Australia to try to resolve outstanding agricultural and automotive issues blocking conclusion of the proposed Trans-Pacific Partnership pact, a senior U.S. official said today in Tokyo.
“‘We were encouraged by the progress we made this week during our negotiations, but we need to underscore that the negotiations before us are tough,’ Wendy Cutler, acting deputy U.S. trade representative, said on Wednesday in Tokyo at the end of four days of talks. ‘The issues range from achieving meaningful market access across all agricultural products to establishing a strong and effective dispute settlement mechanism in the automotive sector.’
“TPP participants view a successful outcome between the U.S. and Japan as critical to the broader Asia-Pacific trade talks. The next round of U.S.-Japan negotiations will take place in Canberra, Australia, where chief negotiators from all 12 TPP countries are meeting ahead of a TPP ministers meeting in Sydney from Oct. 25-27.”
Marcia Zarley Taylor reported yesterday at DTN that, “Some of the nation’s most prominent agricultural economists have a confession to make: Their computer simulators misgauged how fast and deep commodity prices would fall in the last six months. That price surprise completely upended conventional wisdom on how much the new farm safety nets will pay growers for 2014 crops. For farmers, it’s also complicated the decision on which support program to elect during the five-year farm program sign-up this winter.
“When it comes to deciding which farm program to choose — Agriculture Risk Coverage (ARC) or Price Loss Coverage (PLC) — your degree of optimism toward a five-year price forecast is what matters most. Doomsayers favor PLC, those forecasting only slightly depressed prices favor ARC. Kansas State University economist Art Barnaby helps to draw a clearer line: For corn, average yields and season average prices above $3.30 per bushel favor ARC; average yields and prices below $3.30 per bushel favor PLC.”
Gary Schnitkey, Nick Paulson, Jonathan Coppess (Universtiy of Illinois) and Carl Zulauf (Ohio State University) indicated yesterday at the farmdoc daily blog (“Comparing ARC-CO to PLC: APAS Sample Farms and the ARC-CO – PLC Comparison Tool”) that, “Farmers and share-rent landowners will choose between three options for receiving commodity program payments: 1) Agricultural Risk Coverage – County Coverage (ARC-CO), 2) Price Loss Coverage (PLC), and 3) Agricultural Risk Coverage – Individual Coverage (ARC-IC). Here we focus on tools for making comparisons between the first two options: ARC-CO and PLC. The ARC-CO – PLC Comparison Tool will provide payments given user-entered input. APAS Sample farms will provide expected values of payments for different sets of prices and yields. The choice between ARC-CO and PLC likely will come down to three considerations: 1) payment expectations between ARC-CO and PLC, 2) type of risk the farmer wishes to avoid, and 3) availability of Supplemental Coverage Option (SCO).”
Hueleng Tan reported yesterday at The Wall Street Journal Online that, “Several Southeast Asian governments are taking steps to help farmers reeling from a steep fall in prices of rubber, rice and palm oil, after a decade of high prices boosted farmers’ incomes and spurred rural development.
“The governments of Thailand, Indonesia and Malaysia in recent weeks have offered farmers and producers such aid as payouts, cheap loans and tax waivers.”
Michael Howard Saul reported earlier this week at The Wall Street Journal Online that, “Mayor Bill de Blasio’s administration is exploring new ways to regulate the size of large sugary drinks in New York City, holding high-level meetings behind closed doors with health advocates and beverage industry executives.
“‘Mayor de Blasio has made clear he supports a ban on large sugary drinks,’ his spokesman, Phil Walzak, said on Thursday. ‘The administration is currently considering plans on the best way to reach that goal.’” (See also this related graphic from the Journal article).
Todd Neeley reported yesterday at DTN that, “Although USDA has a plan in place to help U.S. farmers make adaptations for possible changes in climate, a new U.S. Government Accountability Office report said USDA is struggling to put together all of the pieces of its plan.
“USDA’s climate change priorities for agriculture include providing better information to farmers on future climate conditions, priorities that GAO said ‘generally align’ with national priorities set by the Obama administration. Those priorities include promoting actions that reduce greenhouse gas emissions, advancing climate science, developing tools for decision makers, and developing better projections of future climate conditions.”
The DTN article noted that, “However, the GAO said ‘the agency is not using its performance planning and reporting process to provide information on how it intends to accomplish this goal or to assess the status of its efforts in this area. According to the Government Performance and Results Act of 1993, as amended, an agency’s performance plan is supposed to explain how the agency will accomplish its performance goals, and its performance reports are supposed to review the extent to which those goals have been met.’”