Farm Economy Beginning to Show Signs of Stress

This is the third year of a financial crunch on the farm. It follows on the heels of a series of tremendous seasons since 2006. The extra money, from then, is now starting to run out.

The financial stress in the ag sector may really begin to show this fall if low commodity prices persist says the Director of the TIAA CREF Center for Farmland Research on the Univeristy of Illinois campus, Bruce Sherrick.

Quote Summary - It is already affecting cash rents and land prices some. However, on a percentage basis not as much as the current cash prices (would suggest) for delivery within this year at least.

Sherrick says a a couple of things have happened which explain this buffering. The last several years have been really quite good for agricultural incomes. So, farmers have pretty strong balance sheets. It is easier to weather a downturn, says Sherrick, after a few good years, than a bad year after a few bad years, “We are seeing, clearly, working capital crunches beginning to hit people. This is the first year that is material, and lenders are seeing and uptick in volume. As we’ve adjusted to more normal stocks, we are into a period were we think, ”this might be the last year were people can really just stand for what’s going on without making some major changes in how they manage cash rents, or inputs, or financial structures".

This does not mean the price of farm land will plummet. Long term interest rates are very, very low and the rate of turnover in farmland is supper small.

Money is cheap and farmland for sale is scarce.

Quote Summary - If you look at the number of acres that sell, maybe around 2% transfer per year within the agriculturally intense states. Only half of that moves outside of a family. The market is thin, and this helps buffer or slow down changes in farmland values because of changes in short term farm income. The low interest rates help people pay for a longterm investment with a stable cash return that can be rented for perhaps 3% of its value on a cash basis.

Farm land doesn’t look like such a dire situation, then, when you step back from it. It also has shown, very reliably says Bruce Sherrick, a positive correlation with inflation. Even if the price of commodities stay relatively low, it may be that the price of farmland, as an owned asset, will help farms stay afloat.

Fewer Hogs and Higher Prices

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.

A Weather Market for Corn in 2016

Nearby corn futures remain above the early January lows, but continue to struggle under the weight of a number of negative market fundamental factors. Todd Gleason has more on the prospects for higher corn prices later this year.

Limited Pork Expansion

The nation’s hog farmers have done a nice of job of not over reacting to last year’s record profits. They’ve limited their expansion plans and consequently should see a good bottomline again for this year, and maybe next.

For all of 2015, pork supplies are expected to be seven percent higher than in 2014. That year the price of pork averaged $76 mostly because the PED virus wreaked havoc on the industry. This years supplies have been farm more stable and supplies for 2016 should only be about one percent higher than in 2015. Hog prices are expected to average about $51 on a live weight basis for this year. Current projections for 2016 are for a similar average price and it means hog farmers will make money says Purdue Extension Agricultural Economist Chris Hurt.

After the record profits of 2014, there has been concern that the industry would over-expand. At this point that concern has not developed with supply and demand anticipated to be in balance for the coming 12 months. This also serves as a warning to the industry to make sure that further expansion plans remain moderate.

There seem to be growing threats in the future for the meats sector. Those include, says Chris Hurt, the continued expansion of total meat supplies into 2016 and 2017 with a rapid ramp up of poultry and increased beef production.

The large drop in finished cattle prices in recent weeks suggest that retail beef prices could begin to drop this fall and provide added competition for pork. In the longer run, beef supplies will continue to expand for multiple years. Potential weakness of meat and poultry exports is also a concern with slowing world economic growth and a strong U.S. dollar.

A strong dollar makes it more difficult to sell U.S. products overseas as they become higher priced. Speaking of price, feed prices will remain low for the next 9 months due to strong yields for 2014 and 2015 crops and weakened exports. Animal product producers will want to take advantage of harvest price lows this fall states Hurt. However, he thinks longer-term, managers need to remain aware that low feed prices are not guaranteed if weather should turn more adverse in some important growing areas.

Lower Pork Costs Driven by Lower Meal Costs

The retail price of a pork chop is getting cheaper. The price of soybean meal is one of the reasons for the decline.

Soybean meal is an important but an “economically” secondary feed ingredient in hog diets compared to corn. Purdue University Agricultural Economist Chris Hurt thinks soybean meal costs, as a feed ingredient, have been about 22 percent of the total costs of raising hogs over the past decade. This compares to 32 percent for corn. In recent years soybean meal has been high priced. For the calendar years of 2012, 2013 and 2014 USDA reports that Decatur, Illinois high-protein meal has had annual averages between $440 and $480 per ton. But with a record U.S. soybean crop in the fall of 2014 and with the second largest crop likely coming this fall, Decatur prices may drop to about $350 per ton and then, as fall turns to winter, even further to average near $325 per ton for calendar year 2016. He says it would be the lowest annual meal price since 2007.

How much have lower soybean meal prices contributed to lower hog production costs? From 2014 highs at $480 per ton to the projected $325 in calendar 2016, costs of production would drop by $5.40 per live hundredweight due to the meal price reduction.

Livestock producers may adjust the corn to meal ratios in diets somewhat depending upon the prices of these two primary feed ingredients. For example, the 2012 drought caused corn prices to be very high relative to soybean meal prices. This relationship caused some shifting to higher protein diets because meal was relatively lower cost than corn. Then for the 2013 and 2014 crops, corn shifted to be cheaper relative to meal. This caused some to reduce their protein levels. In the coming year, corn and meal prices are returning to a more normal long-term relationship.

Estimated total costs of production for a hundredweight of live hogs reached the highest calendar year average in 2012 at $67 per live hundredweight. That dropped to an estimated $51 for 2015. Current projections for 2016 are that total costs will remain about $51. For 2016, lower meal costs are offset by somewhat higher anticipated corn costs, keeping total costs similar to 2015. Clearly a $16 per hundredweight drop in feed costs from 2012 to 2015 and 2016 is a major reduction.

Record costs of production was a contributor, says Purdue University’s Chris Hurt, to higher retail prices. These topped out in September 2014 at $4.22 per pound for USDA’s composite pork average. Of course, PED death losses also contributed to reduced pork production in 2014 as well. Lower priced feed and better control of PED has resulted in higher pork production and as a result consumer pork prices have now fallen to $3.77 per pound.

Given this, Hog producer margins are expected to be near breakeven for both 2015 and 2016. Estimated costs are near $51 and expected live hog prices are near $50. This means a $1 to $2 loss per head. Breakeven implies that supply and demand are close to an equilibrium and that all resources are receiving a “normal” rate of return. This implies that producers have little financial incentive to expand, or to contract. It also means that the lower feed costs over the past few years have been built into more pork production and consumers will now be the beneficiaries of reduced retail prices.

Corn Prices Reflect Export Concerns

December corn futures have been on roller coaster ride up and down this year. First it appeared there would be way to much of the grain, and then - because of the rains - maybe too little, and now it feels like the too-little might become just enough.

The just enough to meet the need has put pressure on the market to move lower. This weakness, writes Darrel Good in this week’s online Farm Doc Daily article, is coming from the supply side. There is a general agreement USDA’s corn production forecast will not increase. It, in August, put this fall’s corn harvest at 13.686 billion bushels. Instead, market commentary seems to suggest the trade is expecting the yield forecast to decline by as much as three to four bushels to the acre. So the crop is getting smaller, but so’s the price. It’s about demand says Good.

Continuing weakness in corn prices reflects perceived demand weakness. Concerns about demand may stem from two sources. First is the concern that exports of U.S corn will fall short of the current USDA projection of 1.85 billion bushels. Second, is the concern about slow economic growth domestically and globally.

Clearly, domestic consumption of corn during the 2015–16 marketing year is not of immediate concern. The USDA projection of 5.25 billion bushels of corn used for ethanol production is consistent with the 5.2 billion expected for the marketing year just ending and a modest increase in domestic gasoline consumption next year. The projection of 5.3 billion bushels for feed and residual use next year equals the projection for the current year. Another large crop implies large residual use of corn and low corn prices along with steady to higher animal numbers should support actual feed consumption of corn.

On-the-other-hand USDA projects corn exports during the 2015–16 marketing year that begins on September 1 at 1.85 billion bushels, equal to the projection for the current year. However, total outstanding sales of U.S. corn for export during the 2015–16 marketing year are relatively small says Darrel Good.

It is recognized that the magnitude of early sales is not a good predictor of marketing year exports. Since 2005, sales as of mid-August as a percentage of marketing year exports have ranged from about eight percent (2005–06) to 42 percent (2012–13) and averaged 18 percent. Current sales represent 12 percent of the USDA projection for the upcoming marketing year. Still, the small export sales total is concerning in the context of potentially weak world demand, the relatively strong U.S. dollar, and expectations of large supplies of corn in other exporting countries.

Factually, with nearly 55 weeks remaining until the end of the 2015–16 marketing year, export sales need to average about 30 million bushels per week in order for exports to reach 1.85 billion bushels. Here’s how this all plays out on the farm. Producers will need to evaluate the corn storage decision says Darrel Good. Current low prices mean farmers will likely choose to store much of the crop that has not yet been priced. The current basis in the cash market and the carry in the futures market give some indication about the potential return to storing corn. In central Illinois, for example, the average cash bid for harvest delivery reflects a basis of about -$.30 relative to December 2015 contract and -$0.52 relative to July 2016 futures. Good says if the July basis improves to about -$.05 by June 2016 (as it did this year) the market is offering about $0.47 per bushel to store corn for about nine months.

That return would cover the out of pocket costs of farm storage, but may be closer to breakeven for commercial storage costs for some producers. The only way to capture the storage return, however, is to forward price the stored crop in the cash or futures market. The spot price of corn will have to increase by more than $0.47 by next spring in order for the return on corn stored unpriced to exceed the likely return to a storage hedge.

Corn Price Fade may be too Early

The price of corn has dropped because the trade believes there will be plenty of it around. Farmers, generally, are not convinced that will be the case, at least east of the Mississippi River.



The price of corn in Chicago increased about $0.90 per bushel from mid-June to mid-July. The increase was driven by a combination of a smaller-than-expected USDA estimate of June 1 stocks and production concerns stemming from record June rainfall in much of the eastern Corn Belt. Over the past two weeks, corn futures prices have declined nearly $0.80 per bushel as production concerns have subsided. Today the trade thinks, based on price, the amount of corn available for the next year will be more than needed.

CME Group December Corn Futures - Daily Chart

There are couple of ways this could change. University of Illinois Agricultural Economist Darrel Good says a tighter supply and demand balance sheet for the coming year could be generated by a tighter supply of old crop corn carried into that new marketing year.

Darrel Good - Based on the current pace of ethanol production, for example, the use of corn for ethanol production during the current marketing year (ending August 31) could be about 10 million bushels more than the current USDA projection of 5.2 billion bushels. Similarly, exports could be slightly larger than the projection of 1.85 billion bushels if Census Bureau export estimates for June, July, and August exceed the USDA export inspection estimates as was the case in the first nine months of the marketing year. However, for carryover stocks to be lower than the current projection of 1.79 billion bushels by enough to meaningfully alter the 2015–16 supply and demand balance would require larger than expected feed and residual use of corn during the final quarter of the marketing year.

This won’t be known until the Grain Stocks report is released September 30th. A tighter supply and demand balance sheet for corn could also result from larger than expected consumption during the year ahead. Such a development would obviously take time to unfold, but opportunities for consumption to exceed the current projection appear to be limited thinks Good. This leaves the size of the crop in the ground as the primary lever by which prices might be pushed higher.

Darrel Good - The trade's average yield expectation appears to be near 165 bushels, 1.8 bushels less than projected in the July 10 USDA WASDE report. The August production forecast will also reflect the estimate of harvested acreage, but a large change from the June acreage forecast is not expected. Based on the projection of 81.1 million acres harvested for grain, a yield of 165 bushels would result in a crop of 13.38 billion bushels, about 150 million bushels less than projected in the July WASDE report. Still, if 2015–16 marketing year consumption is near the current USDA projection of 13.735 billion bushels, year-ending stocks would be abundant at about 1.45 billion bushels. On the other hand, a yield forecast of 161 bushels or less would likely be sufficient to push prices back to the mid-July highs.

Recent corn price declines indicate, says Darrel Good, that the market is removing the production risk premium from the price structure in anticipation of another year of surplus. The question is whether that removal is premature. The USDA’s Crop Production report to be released on August 12 will contain the first survey-based yield and production forecasts for the 2015 crop.

Perspective for the Soybean Market

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.

Pork Industry Continues to Adjust from PED

The price of hogs is on the rebound. It appears to be the economic remnants of a widespread disease outbreak in 2014.

The pork industry continues to adjust from the supply shock created by the PED virus last year. Live hog prices peaked in the summer of 2014 as Porcine Epidemic Virus losses mounted and then fell into the late winter of this season. Looking back it seems prices overshot on the high side due to PED, thinks Purdue University Ag Economist Chris Hurt, and then undershot early this year as market supplies were restored. He says the third phase of this cycle now seems to be the recent recovery in prices - up from the $45 low made in March.

Quote Summary - Now, they have recovered to the low $60s. The low prices in March were clearly related to 14 percent higher production for that month compared to year previous levels and market concerns that pork supplies were going to remain higher by ten percent or more into the spring.

The recent recovery in hog prices, apparently, is related to the fact supplies have not been that high. April pork production was up eight percent. May was about six percent higher. Both are in alignment with the last inventory count from USDA. If those inventory counts continue to hold, then second quarter pork production will be up by six percent, the third quarter up by seven percent, and the final quarter of the year up only four percent says Chris Hurt. He says not only are fewer hogs coming to market, but that they weigh less, too.

Quote Summary - I would guess we’ll average one percent lower weights for most of the rest of this year.

Fewer hogs at lower weights are causing a mid year bump in prices. Live hog prices in the first quarter of the year were $48.47 according to USDA. Prices are expected to average near $58 in the second and third quarters. Hurt thinks it will drop to about $51 in the last quarter of the year, and decline to the high$40 level for the first quarter of 2016. These numbers mean hog producers will make money this year, but lose money starting in 2016 unless the price of corn stays on the bottom of its trading range.

The next important benchmark for the pork industry is USDA’s June Hogs and Pigs report due the 26th. It will show how the industry has grown or contracted since March.

Quote Summary - Producers reported in the March update that they intended to reduce this summer’s farrowings by two percent. This was a surprise given the generally profitable industry since mid–2013. If farrowings should actually expand, this would increase pork production early next year and keep a bearish cast over the industry to start 2016.

If you’d like to learn more about the livestock sector, in particular the pork industry, from Chris Hurt, you may read his thoughts on the Farm Doc Daily website.

Beef Industry Continues Lower Production Trend

The beef industry stands alone in 2015 in its continued reduction in supplies available to consumers.

2014, by contrast, was a special year for the animal production industry. It set record high farm level prices for cattle, hogs, broilers, turkeys, milk and eggs. 2015 should see much lower annualized prices after the surprisingly fast expansion of the poultry, pork and dairy industries. Beef stands alone in the continuation toward lower production. This does not necessarily mean the price of beef will remain record high. Live cattle futures are suggesting a return to a more normal seasonal price pattern this year. This would mean that while beef cattle have so far traded higher than last year, that pattern would end now says Purdue University Extension Ag Economist Chris Hurt.

Hurt :26 …a couple of dollars lower than 2014.

Quote Summary - The futures tone stays weak through summer with prices falling to the middle $140s by the end of summer and then rallying to the low $150s toward the end of the year. With prices so far this year and futures estimates for the remainder of the year, finished steers would average $153, a couple of dollars lower than 2014.

That’s Chris Hurt’s view, however, USDA has a different take. Agency forecasters in the April 9 WASDE (wahz-dee) report took a much more bullish path with $163.50 at the mid-point of their annual estimated range. Also of note is that USDA analysts increased the potential range of prices as the year progresses. One reason to increase a price forecast range is because of greater uncertainty says Hurt.

Hurt :19 …with annual prices near last year’s $155.

Quote Summary - My judgement is that ultimate prices may be somewhere between these two. Current high $150s prices could drop to the very low $150s by late summer and recover to the mid-$150s by the end of the year, with annual prices near last year’s $155.

One thing seems certain, explains Chris Hurt in his May 4th article on the farmdocdaily website 2014 was an extraordinary year for the animal industries. So comparing this year’s prices to last year’s prices may bring inherent dangers. The beef industry, he says, is the only one which will not increase production this year and therefore has a reasonable chance of seeing annual price averages near 2014 levels.

Corn Market Expects Large Supply & Weak Demand

The price of corn is as low as it has been since last fall. It reflects the large size of last year’s crop, and surprisingly little concern about this year’s crop.

December corn futures in Chicago, at the time of this writing, were priced in the low $3.80’s. That’s about twenty cents better than the contract low set last fall, but still not nearly strong enough to reflect the $4.25 season’s average cash price the University of Illinois ag economists are using in their supply and demand table for the coming year. Darrel Good sums it up this way.

Quote Summary - Current prices appear to reflect minimum production risk and surprisingly weak demand prospects.

Let’s take that statement apart. We’ll start with price. The price of old crop corn, while at the lowest level since last October at the futures exchange in Chicago, isn’t nearly so cheap in the country. Last fall corn for July delivery in central Illinois was priced 70 cents under the July contract. It is 14 under now. Here’s what that, in relative terms, means. The cash price for the same delivery time, at this point, could be as much as 70 cents better today than it was last fall. The supply and demand of corn have changed since last fall, too. However, looking forward Darrel Good says the current price of corn reflects expectations for a combination of prolonged demand weakness and another year of ample supplies.

Quote Summary - Expectations for demand weakness center on the ethanol and export markets. It is generally argued that plateauing domestic ethanol consumption, a stronger dollar that could favor ethanol imports and discourages exports, and low crude oil prices will limit the price of ethanol and the demand for corn. Similarly, abundant world grain supplies and a stronger dollar are expected to create a weak demand environment for U.S. corn in the world market. In contrast, domestic feed demand for corn should be supported by ongoing expansion in livestock and poultry numbers, even with some loss of poultry numbers to bird flu.

The combination of expanding livestock numbers and low corn prices, writes Good in his FarmDacDaily website posting of April 27th, should generate a high level of consumption. That’s demand. Supply will be largely dependent on the number of acres of corn farmers plant this spring, and weather this summer. We’ll no more June 30th when USDA releases the Planted Acreage report. Here’s how those numbers have changed from March to June since 1996.

Quote Summary - From 1996 (the beginning of the freedom to farm era) through 2014, the final estimate of planted acreage of corn exceeded the March intentions estimate in seven years and was less than the March estimate in 12 years. In most years, the difference was within the range of sampling error, estimated at one to three percent. The exception was 2007 when actual planted acres exceeded intentions by nearly 3.1 million acres.

There is already a lot of discussion again this year about the direction and magnitude of the difference between actual and intended acreage of corn. Chances are, says Darrel Good, the difference will not substantially alter production expectations.

All else equal, the larger percentage of the crop that is planted in a timely fashion the higher the U.S. average yield potential. However, all else is rarely equal Good claims, with the magnitude of yield ultimately determined by summer weather. Unless an unusually large or small percentage of the crop is planted late this year, yield expectations should continue to focus on trend value in the range of 164 to 165 bushels. The USDA will report an expected yield in the May 12 WASDE figures. That yield expectation is based on a weather adjusted trend model that reflects expected planting progress at mid-May.

As for current prices, these appear to reflect minimum production risk and surprisingly weak demand prospects.

More Hogs than Expected

The USDA March Hogs and Pigs report did little to help explain why numbers were high, other than to simply admit that hog inventory counts from previous surveys were too low.



Pork supplies in the first quarter of 2015 were expected to rise one percent. In reality, first quarter pork production was up five percent. This is because they were 4.5 percent more hogs that weighed about a half percent more than their year earlier counterparts. More hogs at heavier weights has pushed prices down says Chris Hurt, and that’s not the end of it.

Quote Summary - There is an even more price depressing force coming to the market as the number of hogs coming to market in the most recent four weeks has remarkably been ten percent higher than year-ago levels. Higher than expected current numbers may mean that the breeding herd expansion is larger than USDA surveys have indicated and/or that PED death losses were smaller than producers reported to USDA.

If there has been an undercount of animals, the possibility remains says Chris Hurt for higher market numbers than anticipated for the rest of the year.

As a result of the higher actual marketings in the first quarter, USDA revised last summer’s pig crop upward by nearly three percent. As always, “the proof is in the pudding” meaning that if actual winter slaughter is higher than accounted for by last summer’s pig crop, last summer’s pig crop has to be revised upward. USDA did this by increasing the estimated number of farrowings. Hurt has been wondering, based on USDA’s numbers, if the breeding herd has been expanded.

While USDA raised the size of last summer’s farrowings, the size of the breeding herd was not increased. This still leaves unanswered the question of whether the breeding herd is actually higher, which would indicate that the breeding herd has expanded more rapidly than indicated by USDA survey numbers. If the breeding herd has expanded more rapidly than future animal numbers may also be higher than indicated by the USDA counts.

More pigs coming to market in the first quarter than expected must have come from a larger breeding herd thinks Hurt. He says current marketing numbers have been averaging ten percent higher. If the marketing herd is larger, then marketing numbers could continue to surprise the market on the high side and hog prices will stay depressed.

The Next Mile Post for Soybeans & the Crush

Farmers and the trade are very concerned the price of soybeans will fade over the next six months.

There are a couple of mile posts indicators most will be watching as it relates to the production of soybeans. University of Illinois Ag Economist John Newton says the next one up is the Prospective Plantings report due March 31st from the United States of Department of Agriculture.

Quote Summary - The Prospective Plantings report is a big one. It will give us an idea of how many acres of soybeans U.S. farmers expect to sow this spring. I’m also going to continue to watch the domestic soybean crush and U.S. soybean exports. The nation is on pace to export a record volume this year and USDA maintains this number will increase next year. This would be back to back record soybean export years and certainly worth monitoring. Can the world consume soybeans and the current level? If this is possible, then that should provide some price floor, even some positive price pressure from where we are today.

Exports are reported weekly by USDA and starting in August the ag department will begin reporting the soybean crush totals monthly. The agency is picking up and tweaking a discontinued Census Bureau report.

Quote Summary - The monthly numbers will aid the trade in monitoring the pace of the domestic soybean crush. Another item to keep in mind is the importance of the RFS (Renewable Fuel Standards). It may, at some point, cause soybeans to be crushed for oil. This would have implications for soybean meal and soybean meal prices and this may offset corn fed in the residual balance sheets. These are all things to watch. Some are long run and some are short run; the pace of consumption and soybean crush being the two short run things I’m watching.

You may read more from the University of Illinois ag economists on the Farm Doc Daily website. A new article is posted there each business day of the year.

Soybeans + Numbers

Those listening to the markets every day know there is a big difference between the number of acres the trade thinks will be planted to soybeans and the number of acres USDA is so far projecting. These aren’t as far apart as you might think and there may even be some positive wiggle room in them.



The trade has long thought U.S. farmers will plant about 86 million acres of soybeans. USDA thinks they’ll plant 83 and half million. Because USDA is using

Pork's Boom & Bust Price Pattern

Markets can take your breath away and the hog market over the past year has left many breathless says one Purdue University ag economist.



A year-ago in March, the new PED virus was

Crude Oil Jumps Off the Lows

Crude Oil Jumps Off the Lows
Harry Cooney, Growmark Energies Specialist - Bloomington, Illinois

The price of crude oil has rallied off it’s lows. Todd Gleason has more on the reasons why.

The cost of a barrel of crude oil has dropped… 1:51

The cost of a barrel of crude oil has dropped dramatically since last June. Back then the price was more the $100 per barrel. It dropped to nearly $44 a barrel earlier this year and has now begun to make a sharp turn higher. There are series of reasons for the rally says Bloomington based energies specialist for Growmark Harry Cooney.

Quote Summary - There has been a steelworkers strike at some of the refineries. This has caused some concerned. The rig counts have also declined. This number indicates how many oil wells are operational and the trade, which focuses on future supply, thinks the supply may peak out and then start to decline.

However, it is important to remember says Harry Cooney crude oil started its price decline at around $107.00 a barrel. It is very unlikely the oil rig count contraction taking place now will greatly constrain supply. Still Cooney has been advising end users, like farmers that purchase gasoline and diesel in bulk, to lock in the price of their 2015 needs.

Quote Summary - The end users see these values, values they haven’t seen for four or five years, as an opportunity to lock in the price of fuel even though they’re above the recent lows. The price of fuel, unlike other inputs on the farm, has decreased more rapidly in percentage terms.

Nitrogen fertilizer, for instance, has yet to drop in price.

Farmers May Not Benefit from Bumper Crops

Corn and soybean farmers harvested a bumper crop in 2014 — a record 14.2 billion bushels of corn and a record 3.97 billion bushels of soybeans, according to the U.S. Department of Agriculture. Here & Now’s Jeremy Hobson spoke with Chad Hart, an agricultural economist at Iowa State University, about what the record crop means for the farmers’ revenue, since they’re selling the crops at a lower price.

Here & Now airs during the noon hour on WILL AM580.

Riding the Feeder Cattle Roller Coaster

by Paul Peterson - University of Illinois

Futures prices were limit-down for 5 days in a row in mid-December 2014, the most limit-move days in a livestock contract since the BSE (mad cow) selloff in December 2003. Daily price limits in feeder cattle futures were increased from 3 cents per pound ($3/cwt) to 4½ cents per pound ($4.50/cwt), with provisions for additional expansions if needed; complete details are presented here.

For the 22 trading days in December 2014, the January 2015 feeder cattle futures contract had 10 days with price moves up or down of 3 cents per pound or more. And on the first trading day of January 2015, prices closed limit-up at the new 4½ cent daily limit, starting out the New Year with a bang (Figure 1). In contrast, February 2015 live cattle futures have had just 2 limit days (both down) since December 1, and February 2015 hog futures have had none.

So why have feeder cattle prices been so volatile lately? It helps to think about feeder cattle prices as the "shock absorber" between fed cattle prices on one end, and corn prices on the other. When buying feeder cattle, feedlots look at the gross feeding margin, which is

Ethanol Production Profits Dim as Gasoline Prices Plummet

by Scott Irwin & Darrel Good

The magnitude of the decline in crude oil and gasoline prices has taken nearly everyone by surprise. NYMEX nearby crude oil futures this week touched $60 per barrel, almost $50 less than peak prices last summer. This is a major economic event with potentially far-reaching impacts for biofuels markets. We examined some of these impacts in two recent farmdoc daily articles (November 12, 2014; December 4, 2014). Our conclusion was that current high ethanol prices relative to gasoline prices, as illustrated in Figure 1, might slow the growth in domestic ethanol consumption, but would not likely result in consumption that is less than the 10 percent blend wall. In contrast, the high price ratio may represent a threat to

Crude Oil Crash - Start Pricing Needs

Each Tuesday during the Closing Market Report we talk with an energy analyst. This week Growmark's Harry Cooney turned his attention to OPEC, the dramatic drop in the price of a barrel of crude oil, and what to do about pricing 2015 fuel needs. You may listen to the conversation here.