|
|
Arkansas Agriculture
Newsletters
Livestock Market News - Situation and Outlook
Week Ending November 20, 2009
According to Darrell R. Mark, Ph.D., Assoc. Professor, Department
of Agricultural Economics, University of Nebraska–Lincoln: The
historically slow pace of harvest for the 2009 corn crop is well
documented, and the situation is creating risk and uncertainty for
livestock producers. As of November 15, USDA estimated that 54% of
the corn crop was harvested, compared to the previous 5-year average
of 89%. Relatively good harvesting conditions last week and this
week are dramatically advancing harvest progress, but many key corn
growing states are lagging even farther behind than the national
averages imply. Illinois is 43 percentage points below its average
pace, Nebraska is 38 points below, South Dakota is 55 points below,
and North Dakota is an astounding 66 percentage points below its
average harvest pace for this time of year.
While wet weather and resulting wet ground conditions in October
and November are most responsible for the slow harvest pace, several
other factors are tending to slow harvest. This year’s corn crop has
not dried down very well due to this fall’s weather conditions and
late planting last spring. The corn isn’t just a few points above
the 15% level (considered dry) either. Numerous anecdotal reports
will find corn moisture levels between 19-25% across the entire corn
belt. Until just the last week, it was still possible to harvest
high moisture corn (25-35%) to ensile for cattle feed in areas of
Nebraska. As a result, both on-farm and commercial drying capacity
is strained to its maximum. Long lines at elevators evidence that
many farmers are only able to harvest a few thousand bushels per
day. The wet conditions have made it difficult to do much more than
that anyway: in many cases, wagons, trucks, and grain carts can’t be
brought into the fields for fear of getting them stuck in mud. This
inconvenience further slows harvest. As if these problems aren’t
enough, many areas are finding corn with molds, mycotoxins, or other
disease problems that could result in rejection or substantial
quality discounts (particularly if it is above thresholds safe for
livestock consumption).
So, where does all this leave livestock feeders? With a lot of
uncertainty. The recent rally in corn prices associated with the
late harvest have been largely unexpected for livestock feeders.
While it does seem less likely with each passing day, I think there
is still a reasonable probability to see a modest drop in corn
prices and basis levels yet during this harvest season. December
2009 corn futures posted a low on September 21 at $3.16/bu. By
October 23, it had rallied over $4.00/bu and continues to test that
level this week. While the "harvest low" was likely that brief drop
in the third week of September, some pull back on prices is likely
as harvest supplies pressure prices. USDA last week projected the
national yield at 162.9 bu/acre, which, if realized, would be the
highest yield on record. And, with 86.4 million acres, expected
production at 12.921 billion bushels would be the second highest on
record. With final yield estimates not available until January,
there is still time for total corn production to "grow." More
probable than a price drop, though, is pressure on basis. The large,
high moisture crop is already causing bottlenecks with drying
capacity, and ground piles of corn are starting to emerge across the
Western Corn Belt. As those things occur, basis typically weakens,
which is beneficial to cattle feeders and other corn buyers. Omaha,
NE corn basis has already dropped from around -$0.15/bu in
mid-October to -$0.32/bu this week.
Despite prices remaining higher than expected, other unique
things about this year’s corn crop do give cattle feeders an
advantage over other corn buyers (including pork and poultry
producers). High moisture levels in corn have given many cattle
feeders an opportunity to source more high-moisture corn to ensile
than in recent years. In many instances earlier in the corn harvest,
cattle feeders were the best market (likely the only market)
available for high moisture corn. Hog and poultry growers and
ethanol producers would not have been able to handle large volumes
of high moisture corn like Northern Plains cattle feeders can. The
possible presence of mold or mycotoxins in this year’s corn crop,
while never a good thing, could put cattle feeders ahead of other
livestock feeders for some infected corn because safe feeding
tolerance levels are higher for cattle than other species (producers
should consult their nutritionist and veterinarian before feeding
grain with any mycotoxins or mold). A final aspect of this year’s
crop that may help the cattle feeder is a larger than normal
movement of cash corn next March. This fall, a lot of corn is going
into on-farm storage without being fully dried down to 15% moisture.
Aeration systems will use natural air drying to preserve corn during
the cold winter months, but warming temperatures next spring will
likely lead to mold problems and corn going out of conditions in
grain bins, thus spurring farmer selling of corn.
Federal-State Market News, P.O. Box 391,
Little Rock, AR 72203, (501) 671-2200
Prepared by Steven R. Cheney, USDA Officer-in-Charge
Back to
Livestock Market News |
