The United States Department of Agriculture has been moving to support local food production throughout the nation. The agency is focusing on bringing new farmers and businesses into rural and urban areas. To that end, it has developed an online toolkit entrepreneurs can use to help pitch their ideas to lenders and local governments.
The last Hogs and Pigs report is good news for pork producers. Todd Gleason reports it showed fewer hogs are being raised in the United States and that, in turn, should boost prices.
Pork producers say they’ll reduce the size of their breeding herds. Or at least that’s what the latest Hogs and Pigs report showed. Purdue Extension Agricultural Economist Chris Hurt says farrowing should begin slow this spring and summer. However, right now, the breeding herd is as big as it was at this same time last year. Still, it’s a pattern of change and reduction says Hurt.
Quote Summary - The herd had been in an expansion phase from the last half of 2014 through 2015. That expansion was largely because of record high profits due to baby pig losses from PED. That expansion phase seemingly has now ended.
This ‘ending’ is a bit uneven geographically. For the 16 states USDA surveys for the March report, the breeding herd is up nine percent in Oklahoma and 10 percent in Texas. Some of the primary Midwestern states reported a decrease in their breeding herds over the past year; Iowa down five percent, Missouri down four percent, and Minnesota down two percent. In Indiana, where corn yields were reduced by summer flooding, the breeding herd was down seven percent. Those are all the current breeding herd numbers. It’s the forward looking projections that provide hope for higher pork prices.
Pork supplies in the first quarter of 2017 will come from the three percent smaller summer farrowings. However, with more pigs per litter and heavier weights, pork production is expected to be only about one percent smaller.
Chris Hurt’s price forecast for market hogs then is in a range of $49 to $54 for all of 2016, about $1 higher than last year. He expects prices to rise to the $55 to $58 range for averages in the second and third quarters, normally the grill-out seasonal highs, and then to finish the year in the mid-to-higher $40s.
Up next… U.S. Secretary of Agriculture Tom Vilsack has a discussion about policy making news in Washington, D.C. including the TPP, the just announced Local Foods Toolkit, and GMO labeling laws.
The United States Department of Agriculture has been moving to support local food production throughout the nation. Todd Gleason has more on how and why the agency is focusing on bringing new farmers and businesses into rural and urban areas.
Next week (Thursday March 31) USDA will release the quarterly Grain Stocks report. Typically it is overshadowed by the Prospective Plantings report released on the same date. However, as Todd Gleason reports, it occasionally provides a surprise to the trade.
For soybeans, the stocks estimate is often very near the level expected by the market says University of Illinois Agricultural Economist Darrel Good. This is because we generally know how many soybeans are used at any point during year based off the magnitude of the domestic crush and the exports, both of which are tallied either by the government, the industry, or the two combined. The stocks estimate, says Good, really does indicated the magnitude of seed, feed, and residual use of soybeans in the previous quarter. Unlike corn, for which feed and residual use is a large portion of disappearance, seed, feed, and residual use of soybeans is a relatively small portion of disappearance during the winter months. However, he cautions, occasionally the March 1 stocks estimate provides a surprise.
Based on the average trade guess reported by news services, the March 1 stocks estimate has deviated from market expectations by more than 30 million bushels nine times and by more than 60 million bushels four times in the past 25 years.
The expected level of soybean stocks on March 1 this year can be calculated. The USDA’s Oilseed Crushings, Production, Consumption and Stocks report provides information for December of 2015 and January of 2016. The estimate for February will be released April 1. The National Oilseed Processors Association (NOPA) estimate of the magnitude of the February soybean crush by its members can be used to estimate the total February crush. For the nine months that USDA has provided soybean crush estimates (May 2015-January 2016), the USDA crush estimates have exceeded the NOPA crush estimates by 6.4 percent. Applying that ratio to the NOPA February crush estimate, suggests to Darrel Good that 483.1 million bushels of soybeans were crushed in the second quarter of the current marketing year. It’s possible to calculate the number of soybeans exported in the last quarter, too.
Based on a combination of USDA and Census Bureau export estimates, second quarter exports totaled just over 677 million bushels.
This leaves the seed, feed, and residual usage factor. That’s tougher to figure, but a much smaller number. If this year follows the average consumption pattern Good says it would be about 12 million bushels in the second quarter. So, 483 crushed plus 677 exported plus 12 fed equals roughly 1.173 billion bushels consumed in the second quarter. Subtract that from the first quarter stocks, plus the imports and you get 1.55 billion bushels of soybeans on hand March 1st in the United States. The Grain Stocks report March 31 shouldn’t vary much from this number, but it could says Darrel Good.
If the March 1 stocks estimate is surprisingly large or small, the accuracy of USDA’s 2015 production estimate may be called into question. The USDA has revised the previous year’s production estimate by varying amounts in 20 of the past 25 years based on the stocks estimate at the end of the marketing year (September 1). However, it would be pre-mature to question the accuracy of the production estimate based on the March 1 stocks estimate due to the large variation in the quarterly pattern of seed, feed, and residual use of soybeans.
The eight largest revisions in the production estimates following the USDA’s September 1 stocks estimate ranged from 1.1 to 3.5 percent. Only three of those eight large revisions followed a surprise in the March 1 stocks estimate that exceeded 30 million bushels. Conversely, of the nine years in which the magnitude of the surprise in March 1 stocks estimate exceeded 30 million bushels, only three were followed by revisions in the production estimate that exceeded one percent.
USDA will officially kick off the new year for the spring planted crops when it releases two reports on the last day of the month.
The Grain Stocks and Prospective Plantings reports will be released March 31st. Darrel Good says both will help set the tone of the trade for corn and soybeans going forward.
Quote Summary - The Stocks report will be modestly important as it always is for corn. It will give us a reading on how fast we are feeding last year’s crop, but the real information will be in the Prospective Plantings report. It can be a mixed bag. This is because we all know actual plantings deviate from intentions. Certainly, though, when we see the March survey and what farmers are planning this year, it will provide a lot of information about the potential size of the upcoming crops.
The Prospective Plantings report is set up to be very interesting. More than a few acres around the United States need a new home on the spreadsheets. For instance, last fall farmers seeded about 2.8 million fewer acres of winter wheat than they did the previous year. When you couple those acres with what most expect to be fewer Prevent Plant acres, it creates an interesting combination says the University of Illinois agricultural economist.
Quote Summary - On the surface this says, “We’ll have more acres available than we had last year”. What the intentions report will give us a hint at is whether producers are thinking about leaving some acreage idle in 2016 because of the generally low commodity prices. For example, will the winter wheat acres that didn’t get planted go to fallow, or to annual pasture, or will they go to sorghum or an oilseed. Will we see some of the so called fringe areas leave some acreage idled as the numbers would suggest we’ve seen in the past when prices are low. So, that big picture question will be most important in the March plantings report.
Again, the reports will be released March 31st. Last year there were 6.7 million acres of Prevent Plant. That’s on the high side because of the heavy 2015 rainfall. Darrel Good expects this year to be something closer to 3 million acres. And, when you round up to 3 million fewer acres of winter wheat, you get about 6 million float acres that need a home this year either idled, or planted.
USDA’s March World Agricultural Supply and Demand Estimates report didn’t really change much, still that seems a shade friendlier than before to University of Illinois Agricultural Economist Darrel Good.
This is the 30th anniversary of the CRP. It’s a federal program that assists agricultural producers with the cost of restoring, enhancing and protecting certain grasses, shrubs and trees to improve water quality, prevent soil erosion and reduce loss of wildlife habitat.
As of September 2015, 24.2 million acres were enrolled in CRP. CRP also is protecting more than 170,000 stream miles with riparian forest and grass buffers. That’s enough to go around the world 7 times.
The U.S. Secretary of Agriculture calls CRP one of the most successful conservation programs in the nation’s history saying it has helped farmers, ranchers, conservationists, hunters, fishermen and other outdoor enthusiasts to set aside lands that otherwise might be put into production agriculture.
USDA, for its part, suggests when commodity prices are low, enrolling sensitive, low-quality and marginal lands in CRP can be especially attractive to farmers and ranchers, as it softens the economic hardship for landowners at the same time that it provides ecological benefits.
Contracts on 1.64 million acres of CRP are set to expire on Sept. 30, 2016. Producers with expiring contracts or producers with environmentally sensitive land are encouraged to evaluate their options under CRP. The current enrollment period closes in February.
This morning (Friday) USDA updated crop production numbers for corn and soybeans. Todd Gleason discussed the report with University of Illinois Agricultural Economist Darrel Good.
The U.S. Secretary of Agriculture held nothing back on the University of Illinois campus this morning (Thursday Sept 10) when he talked about bio fuels and blender pumps for 21 states.
To this point in the season USDA seems satisfied there will be plenty of corn around for the coming year and it won’t be a worth a whole lot. However, possibilities remain that the crop could shrink in size, and that the price might consequently rally.
The price of corn can rally for two reasons. The trade might think the size of this year’s harvest is getting smaller, or there could more demand for the crop - no matter its size. Darrel Good has decided to take up both of those issues. Today we’ll hear what he thinks about the possibilities that corn crop might be smaller than predicted in August. The University of Illinois agricultural economist says a smaller supply projection could result from some combination of a lower estimate of harvested acreage or a smaller yield forecast.
The estimate of planted and harvested acreage should become more precise in October as the USDA’s National Agricultural Statistics Service (NASS) has a chance to review acreage data reported to the Farm Service Agency (FSA) by producers enrolled in federal farm programs. Last year, for example, the forecast of harvested acreage declined by 742,000 acres from August to October. For now, the FSA monthly reports of planted and prevented acreage will be monitored to form expectations about likely changes in NASS acreage estimates. The first of those reports was released today, with producers reporting 83.147 million acres planted to corn compared to the current NASS estimate of 88.897 million.
That’s a big difference, but the FSA acreage figure will grow as acreage reporting and processing is completed. It is important to remember the final FSA figure will be less than the final NASS estimate since not all producers are required to report acreage to the Farm Service Agency. So far FSA shows 2.3 million prevent plant corn acres have been certified. That compares to 1.54 million acres reported in August last year and the final 2014 report of 1.6 million. While big, Darrel Good doesn’t that that difference is significant.
The magnitude of prevented plantings reported so far this year does not point to a substantial decline in the NASS estimate of planted acreage of corn. It is possible, however, that the NASS forecast of corn acreage harvested for grain will decline. The current forecast of the difference between planted acreage and acreage harvested for grain of 7.8 million acres is only 300,000 acres larger than the 1996 to 2014 average.
The NASS August forecast of the 2015 U.S. average corn yield of 168.8 bushels was about four bushels above the average trade guess reflected in news service surveys. History suggests that the forecast will likely change in the coming month by enough to alter the expectations of year-ending stocks.
In the 40 years from 1975 through 2014 the yield forecast, says Darrel Good, changed by less than two bushels through the August to November forecast cycle in only five years. Since the August forecast was higher than expected this year, many have argued that subsequent forecasts will be lower. Looking specifically at the change in the yield forecast from August to September, the forecast has declined in 19 of the previous 40 years. The decline exceeded one bushel in 14 of those years and exceeded two bushels in nine years. None of this, unless weather conditions change, lead Darrel Good to believe USDA will find much different to report this September.
At this juncture, a case for a substantially lower USDA corn production forecast next month is difficult to make. That picture could change a bit based on actual weather conditions and crop condition ratings over the next three weeks.
The September USDA Crop Production Report is due Friday the 11th.
ifr150821–105
Will the Corn Production Forecast Get Smaller
Darrel Good, Ag Economist - University of Illinois
To this point in the season USDA seems satisfied there will be plenty of corn around for the coming year and it won’t be a worth a whole lot. Todd Gleason has more on the possibilities that the crop could shrink in size, and that the price might consequently rally.
The price of corn can rally for two reasons…
3:49 radio
4:08 radio self contained
The price of corn can rally for two reasons. The trade might think the size of this year’s harvest is getting smaller, or there could more demand for the crop - no matter its size. Darrel Good has decided to take up both of those issues. Today we’ll hear what he thinks about the possibilities that corn crop might be smaller than predicted in August. The University of Illinois agricultural economist says a smaller supply projection could result from some combination of a lower estimate of harvested acreage or a smaller yield forecast.
Good :42 …compared to the current NASS estimate of 88.897 million.
Quote Summary - The estimate of planted and harvested acreage should become more precise in October as the USDA’s National Agricultural Statistics Service (NASS) has a chance to review acreage data reported to the Farm Service Agency (FSA) by producers enrolled in federal farm programs. Last year, for example, the forecast of harvested acreage declined by 742,000 acres from August to October. For now, the FSA monthly reports of planted and prevented acreage will be monitored to form expectations about likely changes in NASS acreage estimates. The first of those reports was released today, with producers reporting 83.147 million acres planted to corn compared to the current NASS estimate of 88.897 million.
That’s a big difference, but the FSA acreage figure will grow as acreage reporting and processing is completed. It is important to remember the final FSA figure will be less than the final NASS estimate since not all producers are required to report acreage to the Farm Service Agency. So far FSA shows 2.3 million prevent plant corn acres have been certified. That compares to 1.54 million acres reported in August last year and the final 2014 report of 1.6 million. While big, Darrel Good doesn’t that that difference is significant.
Good :31 …is only 300,000 acres larger than the 1996 to 2014 average.
Quote Summary - The magnitude of prevented plantings reported so far this year does not point to a substantial decline in the NASS estimate of planted acreage of corn. It is possible, however, that the NASS forecast of corn acreage harvested for grain will decline. The current forecast of the difference between planted acreage and acreage harvested for grain of 7.8 million acres is only 300,000 acres larger than the 1996 to 2014 average.
The NASS August forecast of the 2015 U.S. average corn yield of 168.8 bushels was about four bushels above the average trade guess reflected in news service surveys. History suggests that the forecast will likely change in the coming month by enough to alter the expectations of year-ending stocks.
In the 40 years from 1975 through 2014 the yield forecast, says Darrel Good, changed by less than two bushels through the August to November forecast cycle in only five years. Since the August forecast was higher than expected this year, many have argued that subsequent forecasts will be lower. Looking specifically at the change in the yield forecast from August to September, the forecast has declined in 19 of the previous 40 years. The decline exceeded one bushel in 14 of those years and exceeded two bushels in nine years. None of this, unless weather conditions change, lead Darrel Good to believe USDA will find much different to report this September.
Good :17 …crop condition ratings over the next three weeks.
Quote Summary - At this juncture, a case for a substantially lower USDA corn production forecast next month is difficult to make. That picture could change a bit based on actual weather conditions and crop condition ratings over the next three weeks.
The September USDA Crop Production Report is due Friday the 11th.
USDA’s National Agricultural Statistics Service (NASS) will release the first survey-based yield and production forecasts for the 2015 corn and soybean crops this Wednesday (tomorrow/today). Even though a description of the NASS crop production forecast methodology is widely available, there always seems to be some misconceptions about how NASS makes corn and soybean yield forecasts. University of Illinois agricultural economists Darrel Good and Scott Irwin put together a brief overview of that methodology and posted to the FarmDocDaily website.
While they say their summary does not do full justice to the very comprehensive forecasting methodology, it is useful to place the upcoming yield forecasts in the proper perspective.
NASS corn and soybean yield forecasts are made in August, September, October and November. The final yield estimate is released in January based on the comprehensive December Agricultural Survey of producers. Two types of surveys are used each month to collect the forecast data.
The Monthly Agricultural Yield Survey (AYS) of producers is conducted in 32 states for corn and 29 states for soybeans with a total of about 25,000 producers surveyed for all crops in August. The Objective Yield Survey (OYS) is conducted in 10 states for corn and 11 states for soybeans. The surveys are generally conducted in a two week period ending about a week before the release of the forecasts.
For the Agricultural Yield Survey, a sample of farm operations to be surveyed is drawn from those who responded to the June acreage survey. While the sample of operations to be surveyed changes from year-to-year, for any particular year the same operations are interviewed each month from August through November. Survey respondents are asked to identify the number of acres of corn and soybeans to be harvested and to provide a forecast of the final yield of each crop. Based on these responses, average yields are forecast for each survey state and for the nation.
The goal of the Objective Yield Survey program is to generate yield forecasts based on actual plant counts and measurements .The sample of fields (1,920 for corn and 1,835 for soybeans) is selected from farms that reported corn (soybeans) planted or to be planted in the June acreage survey. A random sample of fields is drawn with the probability of selection of any particular field being proportional to the size of the tract. Two plots are then randomly selected in each field.
Data collected from each corn plot during the forecast cycle are used to measure the size of the unit and to measure or forecast the number of ears and grain weight. These data include (as available based on maturity) row width, number of stalks per row, number of stalks with ears or ear shoots per row, number of ears with kernels, kernel row length, ear diameter, ear weight in dent stage, weight of shelled grain, moisture content, total ear weight of harvested unit, lab weight of sample ears, weight of grain from sample ears, and moisture content of shelled grain from sample of mature ears. Corn yield is forecast based on the forecast (or measurement if maturity allows) of the number of ears, the weight per ear, and harvest loss.
Data collected from soybean plots (as available based on maturity) include row width; number of plants in each row; number of main stem nodes, lateral branches, dried flowers and pods, and pods with beans; weight and moisture content of beans harvested by enumerator; and weight and moisture content of harvest loss. The data collected are used to forecast yield based on a forecast (or measurement if maturity allows) of the number of plants per acre, the number of pods with beans per plant, the average bean weight, and harvest loss.
For both corn and soybeans, the state average yield forecast based on the Objective Yield Survey is the simple average of the yields for all the sample fields. In addition, a state yield forecast is also made by first averaging the forecast or actual yield factors (such as stalk counts, ear counts, and ear weight) and then forecasting the state average yield directly from these averages. This forecast is based on a regression analysis of the historical relationship (15 years) between the yield factors and the state average yield. State average yields are combined to forecast the U.S. average yield.
The NASS corn and soybean survey and forecasting procedures produce a number of indictors of the average yield. In August these indicators include: average field level yields from the Objective Yield Survey, average state level counts from the Objective Yield Survey, and the average yield reported by farmers in the Agricultural Yield Survey. Each of the indicators provides input into the determination of the official yield forecasts by the USDA’s Agricultural Statistics Board.
The accuracy of the USDA yield forecasts, write Darrel Good and Scott Irwin, relative to the final yield estimates varies from year to year, but as would be expected, improves each month through the forecast cycle as the crops become more mature.
Rain from Missouri to Ohio has kept farmers from planting part of this year’s soybean crop, but nobody knows for sure - yet - just how many acres have been idled.
USDA has a term for land farmers planned to, but failed to sow because of the weather. It is “prevent plant”. This year rain has prevented farmers throughout the Midwest from planting some acres of soybeans. USDA has one figure already, but it is surveying farmers in Kansas, Missouri, and Arkansas to see if it needs to be updated. The figure is not for prevent plant, but rather for planted acreage. This year that is expected to be a record high 85.1 million acres. But there has been a lot of rain and the number will probably change. Gary Schnitkey wanted to know if history could act as a guide to how many acres might eventually not be planted to soybean.
Quote Summary - Just to give you a feel, from 1996 through 2014 on average there were 759 thousand prevented plant acres for soybeans in the U.S. There were four years when this number topped a million acres. The highest was 2013 at 1.69 million acres
The other three years in which prevent plant exceeded one million acres for soybean include 2001, 2010, and 2011.
Quote Summary - The common thing in all those years was either North Dakota, South Dakota, or Minnesota or some combination of the three having a large number of prevent plant soybean acres. Following those three it was Minnesota. The rank order is South Dakota, North Dakota, Minnesota, and then Missouri. These are typically the states you look at for large numbers of soybean acres going to prevent plant.
The Dakota’s and Minnesota are not the problem this year. It leaves, mostly, Missouri. And, historically, the highest number of soybean prevent plant acres in this one state is only 200,000.
Quote Summary - We are looking at something larger than that. The largest we’ve ever seen in the United States for a single is 450 thousand. So if we see something over half-a-million acres in Missouri, which we could well see, that would be record setting and a million would be way out there.
USDA will update the soybean acreage figures for Missouri, Kansas, and Arkansas August 12th along with the release of the Crop Production report and the monthly supply and demand tables.
We’ll know a lot more about where the price of soybeans is headed at the end of this month. Still, it is useful to understand how price arrived where it is today.
Last fall USDA projected there would be about 475 million bushels of soybeans leftover by the close of the marketing year. That’s this fall. The agency has trimmed that number back over time. This month the target is 330 million bushels.
Usage has been really strong and it is important to remember says University of Illinois Ag Economist Darrel Good, but it did not change the balance sheet very much in this one month. Over time it has, however, been really supportive to the price of soybeans - keeping them above $9 a bushel on the board. Demand has held the bottom end of the market.
Supply, in the coming marketing year on-the-other-hand, is the problem at hand. The June 30th Acreage report is supposed to help clarify this matter. The spring rains, especially in Kansas and Missouri, may cause that not to happen says Good.
Quote Summary - The June acreage report will be interesting this year, for those two states and maybe more, because it will in fact still reflect some intentions for those acres not planted at survey time. How will producers report those intentions? Are they still planning to plant all the soybean acres if it dries out? Or have they already made a decision to abandon and go to prevent plant? So, even after the June number is released, uncertainty about acreage will remain. It will make the August and September FSA Prevent Plant acreage reports an important way to tweak the June number.
A tweak of three to five million acres of prevent plant for soybeans, thinks Darrel Good, would be enough to change the balance, shifting the overwhelming supply of soybeans that so far appears to be coming - consequently now pegged at 475 million bushels just like last year - to something far more supportive of price.
This week (June 10th) USDA lowered its estimate of how many bushels of corn would be used to make ethanol. It surprised the market. However, there is an explanation.
Once a month the United States Department of Agriculture releases a report predicting how corn will be used in several different categories; how much will be fed to livestock, how much will be exported, and how much will be used to make the gasoline additive ethanol. This month it dropped the number of bushels of corn to make ethanol by 25 million. It’s still a big number at 5.175 billion bushels, but the trade didn’t like it. University of Illinois ag economist Darrel Good says it may mean less than the surprise it gave the trade. This, he says, is because the number is calculated in a new way.
Quote Summary - USDA sited its new Grain Crushings and Co-Products Production survey instituted last fall. It shows the number of bushels of corn being consumed to produce ethanol isn’t as large as previously forecast. This suggests the efficiency of ethanol production has in fact increased. So, there is a situation where ethanol production is up four-percent year-over-year, but USDA is only projecting a one-percent increase in corn use. This is because of the new survey data.
Consequently, the new data caused USDA to raise the estimated number of bushels leftover from this market year to go up by 25 million bushels. The increase did not surprise the marketplace. It was looking for a 25 million bushel increase. It just didn’t come from the place it thought it would says Darrel Good.
Quote Summary - They were looking for a lower feed and residual number, not a lower ethanol number.
The trade had dialed in a lower feed and residual category number based on bird flu, the number of turkeys and chickens euthanized because of avian influenza, and therefore no longer consuming corn. This may still show up in the end of the month Grain Stocks report. Even then, it may not be clear thinks Good. Historically, the numbers in the June Grain Stocks report have been noisy.
Quote Summary - It is pretty noisy. The June report in recent years has had some big surprises. We just never know the direction of the surprise. The market needs to be aware of that. The market, at this juncture, seems to be thinking the feed demand is a little weaker than what USDA has projected.
This year USDA has a better corn for ethanol number than in the past, though it doesn’t quite fit with trade perception. They’ll need to adjust. The June Grain Stocks report isn’t likely to help. The feed and residual category, which the trade expects to be smaller, is just an educated guess and includes a big buffer - the residual part of the name.
Quote Summary - September 1, 2014 stocks were 38 million bushels smaller than expected just three weeks before the release of the stocks report. The level of uncertainty this year is magnified by the March 1, 2015 stocks estimate that hinted that the 2014 crop may have been overestimated.How much of an over estimate remains to be seen. It’s a glimmer of hope for the price of new crop soybeans. A glimmer that depends greatly on the pace of old crop soybean consumption. About 45 percent of the soybeans raised in the United States are exported. So we’ll focus only on that number. USDA in the April estimates said this marketing year 1.79 billion bushels of soybeans would be shipped out of the country. The total export commitments have already reached this number says Good.
Quote Summary - However, some current outstanding sales may be cancelled and it is typical for some sales to be carried into the next marketing year. Additional net sales of about 60 million bushels are probably needed if exports are to reach the USDA projection for the year.So the export number looks safe as does the domestic crush figure. USDA could adjust either of these going forward in the monthly reports, but today this looks unlikely. It leaves the quarterly grain stocks number as the tipping point. There are two more of those reports remaining for the old crop - June and September. Even when those numbers come out, it isn’t clear how USDA will use them until the following WASDE or supply and demand table is released. So it will be October before any glimmer could be truly identified.
