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"Under those circumstances, the
strength of demand will be extremely important in determining the
post-harvest price pattern," said Darrel Good. "What level of prices
will be required to limit consumption to the level of supply? The
market will carefully monitor the monthly soybean crush reports, the
monthly estimates of processing uses of corn and quarterly USDA
stock reports.
"In addition, monthly reports of
livestock numbers, cattle on feed and the hog inventory will provide
information about potential adjustments in use. In the case of
exports, the market has weekly USDA estimates of export sales and
export inspections."
Good’s comments came as he reviewed the
impact of recent weather changes on market prices. Recent
precipitation in some of the drier areas of the Midwest has brought
a halt to the week-old rally in corn and soybean prices.
"The market now has to sort out the
potential yield impact of the late-season rainfall," said Good.
"August precipitation, of course, will result in higher average
yields than would have occurred without the rainfall. The question
is whether yields will exceed the USDA August forecast.
"The objective yield portion of the
August forecast is based on the assumption of normal growing
conditions following the collection of data for the August
forecast."
Good added that the market remembers
the patter of yield forecasts last year, when late-season rainfall
also brought some relief to dry areas. For soybeans, the September
yield forecast was 0.5 bushel below the August forecast, but the
January estimate was 0.9 bushel above the August forecast. For corn,
the September forecast was 0.4 bushel below the August forecast, but
the January estimate was 4.3 bushels above the August forecast.
Contrary to popular belief, the late rains last year appeared to
boost corn yields more than soybean yields.
Based on the USDA’s forecast that
71.001 million acres of corn will be harvested for grain in 2002,
each bushel change in yield would mean a 71-million-bushel change in
production.
"A four-bushel increase in the U.S.
average yield this year would change prospects for a very tight
supply-and-demand balance to prospects for a more comfortable
balance," said Good. "Still, year-ending stocks might not be much
above one billion bushels."
[to top of second column in
this article]
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Harvested acreage of soybeans is
projected at 72.029 million acres, so that a one-bushel change in
yield would alter production by 72 million bushels. A
72-million-bushel increase in production over the August forecast
would produce a crop of 2.7 billion bushels.
"A crop of that size would still
require a 200-million-bushel reduction in use during the year ahead
in order to maintain year-ending stocks above 150 million bushels,"
said Good.
Currently, the only consumption data
available are the weekly USDA export sales reports. Early sales are
not a good indicator of actual shipments in the subsequent marketing
year, but these sales are examined for clues about buying patterns
of individual importing countries. As of Aug. 8, only 90.5 million
bushels of soybeans and 86.3 million bushels of corn had been sold
for export during the 2002-03 marketing year.
"The last time that consumption of U.S.
corn and soybeans had to be restricted was the 1995-96 marketing
year," said Good. "Two factors appear to be significantly differed
for corn in 2002-03 than in 1995-96. First, the magnitude of the
needed cut in consumption was much larger in 1995-96. Use was
reduced by 800 million bushels, or 8.6 percent in 1995-96 compared
to use in 1994-95. This year, use can be maintained at the level of
use during 2001-02 if the crop is at least as large as the August
forecast.
"Second, demand does not appear to be
as strong currently as it was in 1995-96. High livestock prices and
strong world economics meant that adjustments in consumption were
not made early in the 1995-96 marketing year and that an extremely
high price was eventually required to force the necessary reduction
in use. The implication is that, with a trend yield in 2003, price
will not have to go nearly as high this year as in 1995-96. The
price pattern this year may be more typical of a short crop year,
peaking early in the year."
For soybeans, the current situation is
different from that of 1995-96 in two significant but contrasting
ways, Good noted.
"The use of
U.S. soybeans may have to be reduced by more than 200 million
bushels this year, compared to a 60-million-bushel reduction in
1995-96," he said. "However, the 2003 South American soybean crop
may be double the size of the 1996 crop. Larger South American
supplies mean a lower price would be required to make the needed
reduction in the consumption of U.S. soybeans."
[U
of I news release]
|
|
Yield
estimates
Aug. 12 is the release date for the
USDA’s first objective yield estimate of corn and soybean crops.
Pending USDA’s latest numbers, other estimates have been published:
1. F.C. Stone: corn at 9.032 B (125.3
b/a) and soybeans at 2.699 B (37.5 b/a)
2. Bill Tierney: corn at 8.69 B (123.2
b/a) and soybeans at 2.573 B (36.5 b/a)
3. Sparks: corn at 8.977 B (125 b/a)
and soybeans at 2.677 B (37.2 b/a)
4. Doane: corn at 8.97 B (125.5 b/a)
and soybeans at 2.75 B (38.2 b/a)
5. Allendale: corn at 9.114 B (127.9
b/a) and soybeans at 2.752 B (34.77 b/a)
6. USDA July: corn at 9.790 B (135.8
b/a) and soybeans at 2.860 B (39.7 b/a)
Most of the estimators are not
expecting USDA to totally agree with them. USDA is expected to
slowly ratchet down its estimate, instead of a sudden significant
drop.
Volatile prices are common in the
summer, says Extension marketing specialist Darrel Good, but he says
this year’s daily yo-yo prices are unusual. One reason is the
billion bushel range in corn estimates and the 360 million bushel
range in soybean estimates. Another reason is the impact 2002 U.S.
crop size will have on U.S. and world stocks.
He says price stability will not likely
return until the market is comfortable with production prospects,
and confidence in crop size may be delayed until the September or
October USDA reports. History suggests that prices will peak early
this year. Darrel adds that the high may have already occurred, or
it could come as late as November, underscoring the difficulty of
making pricing decisions. He advocates an averaging pricing
strategy.
Yield estimating may be one of the most
important activities you can do right now. It may not be fun, but
knowing your potential production will enable you to market early
and often. The old adage "short crops have long tails" could be the
tale of the market this year. It will be much more profitable to
forward sell now than take loan levels later.
Do you
have downed corn?
The wind may have been secondary to
problems such as corn rootworm larvae damage, soil compaction that
hampered good root development or poor stalk strength. Do some good
scouting now to prevent a recurrence next year.
Farmland
values
Illinois farmland values have risen
steadily in the past five years, according to USDA, which puts the
average acre at $2,640, up $510 since 1998. Tillable land is $2,750.
Cropland went up 4.4 percent nationally from last year. Values had
been increasing more than 5 percent a year, so the rate of increase
slowed from previous years, likely due to low commodity prices.
Insect
headaches
Problems with insects have been serious
in some places and minor in others.
[to top of second column in this
article] |
Corn rootworm adults are being found in
fields where they were never before seen. Root ratings are being
made in 25 central Illinois counties to determine the pressure of
corn rootworm larvae.
Corn borers did not materialize in
threatening populations as had been expected. Since they require
lots of moisture, the later summer drought negated reproduction.
Soybean aphids seem to have been
limited in their infestations this year, both in Illinois and the
rest of the Midwest. Nevertheless, scouting is still strongly
encouraged.
Farm household income
Farm subsidies will be criticized when
the public hears average farm household income is at $62,019,
compared with $57,045 for all U.S. households. What the public will
not hear is that from 1964 to 2000 income from off-farm earnings
grew from $10 to $125 billion, while farmers’ net cash income from
agriculture sources grew only $36 billion.
Chops on
sticks
Convenience foods just took a new turn
at the Illinois Pork Producers. IPPA is promoting "pork chop on a
stick," a thick-cut rib chop specially trimmed so that the bone of
the chop serves as the stick for the consumer to hold. The only
place to find one is at the Illinois State Fair Commodity Pavilion.
Sounds like an opportunity to "pig out."
Pork
production
Red ink is increasing for pork
producers according to University of Illinois Farm Business Farm
Management. Because of higher grain prices, feed costs could
increase significantly and are expected to average about $21.75 per
hundredweight, with non-feed costs estimated at $17.75 in 2002.
Total costs of production would be $39.50 per hundredweight.
Milk
production
Black ink could increase for dairymen
according to Mike Hutjens, Extension dairy specialist. He says milk
production is up 2 percent, but demand is flat. The base price for
milk has dropped $5 per hundredweight, but consumers have yet to see
that cut. He said if producers would cut their milk production by 3
percent, their net income would increase $318 each day.
Lambing
School
New, beginning and experienced
shepherds are invited to attend the U of I Lambing School on Sept.
21. Topics covered include nutrition of the ewe, lambing barn
preparation and obstetrics, grafting methods, raising orphan lambs,
docking, and identification. Register by the Sept. 2 deadline at:
http://sheepnet.outreach.uiuc.edu.
Fee
hunting
If fee
hunting is a prospect for added farm income, plan to attend a Sept.
10 seminar near Pittsfield. You’ll learn management techniques to
establish and maintain a successful fee hunting enterprise including
information on harvest strategies, habitat development, economics
and marketing. For more information about the 9:30 a.m. to noon
workshop, call Mike Rahe at (217) 785-5594 or e-mail
mrahe@agr.state.il.us.
[Stu Ellis] |
|
"The decision tool is a Microsoft Excel
spreadsheet developed by William Edwards at Iowa State University
and to which an Illinois database has been added," explained Dale
Lattz, U of I Extension farm management specialist, who, along with
colleague Gary Schnitkey, developed the Illinois version.
To reach the spreadsheet, click first
on "Policy" on the main page and then on "Farm Bill Decision Tool
Spreadsheet" under the "2002 Farm Bill" category.
|
"We’ve updated the tool with new
information as better interpretations of the new farm bill have
developed," explained Lattz.
Lattz added
that producers will be able to see the spreadsheet and use it in a
display at the U of I College of Agricultural, Consumer, and
Environmental Science’s Agronomy Day, on Aug. 22 at the South Farms.
[U of I news release] |
