Annual Market Outlooks

Bullish 2023 Cattle Outlook

Tue, 03 Jan 2023 19:41:40 GMT

Cattle prices will be higher in 2023. That’s the consensus of market analysts across the industry.

How those higher prices translate into rancher profitability is yet to be determined. That’s because the current “once-in-a-century” drought is worse than the previous “once-in-a-century” drought producers experienced a decade ago.

“Cattle prices are higher and will continue to trend higher in 2023,” says Derrell Peel, Oklahoma State University livestock economist. “At some point, when drought conditions abate, increased heifer retention and reduced cow culling might cause cattle prices to spike sharply higher. The timing is uncertain with ongoing drought and might be more likely in 2024.”

While drought-induced herd reductions will be supportive of prices going forward, consumer demand for beef remains steadfast at a high level.

“Demand for beef, both domestically and in our export markets, was strong throughout 2022 and will continue,” says John Nalivka, president of Sterling Marketing, Vale, Ore. “With declining cattle numbers we’re seeing things fall into place for better cattle markets the next couple of years.”

Mother nature is key

Yet the question of profitability for ranchers remains largely unanswered as any economic forecast hinges on drought relief. Without a return to more normal levels of precipitation, many cow-calf and stocker operators are stuck in survival mode.

“The key is Mother Nature,” says CattleFax CEO Randy Blach. “We need to see rain in our key grazing areas, and we believe we’ll see a shift from the La Niña weather pattern this spring that will start to moderate the drought. If that happens, it will stop the liquidation of the beef cow herd.”

This is the third year of La Niña, which in its simplest form is a cooling of the equatorial Pacific waters from near the coast of South America westward for thousands of miles. The opposite is El Niño, a warming of roughly those same areas. If the magnitude is strong enough, both events can alter the jet stream patterns in the Northern Hemisphere, which can alter temperatures and precipitation.

Fewer cows, tighter beef supplies

The pandemic-induced backlog in 2020 and the drought-forced liquidation of cow herds across the Central Plains and the West that accelerated through 2021 and 2022 delayed the reduction in beef production and fed cattle slaughter. The result is tighter inventories that will drive significant reductions in beef supplies in the coming years.

Long lines of ranchers hauling cows to market last summer was an indicator of how dire the drought had become. Still, the actual numbers are stunning. Beef cow slaughter in 2022 was roughly 12% higher than 2021, which was 9% higher than 2020. The beef cow culling rate, according to USDA, was record high at 13%.

The result, analysts project, will be a decline of 1 million beef cows in the Jan. 1, 2023, inventory numbers USDA will release later this month. The U.S. beef cow herd will total about 29.1 million head, down 3.3% from last year and about even with the previous drought-induced low in 2014.

“From 2011 to 2013 the drought, beginning in the Southwest and moving to the Midwest, pushed the beef cow inventory in 2014 to its lowest level since 1952. We have matched that decline during this drought,” Nalivka says.

Cow liquidation, however, is not complete and analysts project the national herd could decline another 300,000 next year and 200,000 head more by 2025.

“The effects of this drought will linger for ranchers even if they see relief this spring,” Nalivka says. “The drought forced herd culling, sure, but it also drove hay and feed prices higher at a time when inflation was pushing fuel and other costs higher. I believe this drought has been more impactful than the previous one.”

Nalivka projects the total U.S. cattle inventory on Jan. 1, 2023, at 89.08 million head, a decline of 3.1% and the first time the total has dropped under 90 million since 2015. He further estimates the total number of feeder cattle outside of feedlots to decline 4% on Jan. 1, which is roughly 1 million fewer head.

Despite tightening supplies, feedyard inventories have remained near capacity the past three years. That will change with inventories expected to fall below year-ago levels throughout 2023. Fewer cattle on feed will lead to reduced beef production.

“Beef production will decline in 2023, but the magnitude is uncertain,” Peel explains. “The smallest decline is expected in the range of 3% to 4%, but it could be as much as 7% to 8%. The difference will depend on cattle slaughter, which in turn, will depend on drought conditions.”

If drought conditions moderate this year, cattle slaughter and beef production could drop substantially. A return to more normal rainfall could even trigger some level of herd expansion, further tightening feeder supplies and driving prices even higher.

USDA Forecasts Farm Sector Profits to Remain Above Average in 2022

Wed, 05 Oct 2022 18:44:12 GMT

USDA released its latest farm sector profit forecast on Thursday. According it’s estimates, farmers may fare better than previous years in many 2022 balance sheet boxes.

Net Farm Income

Net income, a broad measure of profits, is forecast by USDA at $147.7 billion in calendar year 2022, an increase of $7.3 billion (5.2%) in 2022 relative to 2021.

The 2021 value is an increase of $45.9 billion (48.5%) relative to 2020. When prior years are adjusted for inflation, net farm income in 2021 was at its highest level since 2013.

(Farm Journal)

Net farm income in 2022 would be $0.9 billion (0.6%) lower than in 2021 yet 42.1% above its 20-year average (2002–21) of $104.0 billion in inflation-adjusted dollars.

Net Cash Farm Income

USDA forecasts $168.5 billion in 2022, an increase of $22.1 billion (15.1%) relative to 2021. The 2021 value was $29.6 billion (25.4%) above 2020.

When adjusted for inflation, 2022 net cash farm income is forecast to increase by $13.5 billion (8.7%) from 2021 and be at its highest level since 2012.

Net cash farm income in 2022 would be 34.5% above its 2002–21 average of $125.3 billion. Net cash farm income encompasses cash receipts from farming as well as farm-related income (including government payments) minus cash expenses.

It does not include noncash items — including changes in inventories, economic depreciation, and gross imputed rental income of operator dwellings — reflected in the net farm income measure above.

Cash Receipts

From the sale of agricultural commodities, USDA forecasts cash receipts to increase by $91.7 billion (21.2%, in nominal terms) from 2021 levels to $525.3 billion in 2022.

Total crop receipts are expected to increase by $36.4 billion (15.3%) from their 2021 level following higher receipts for soybeans, corn, and wheat. Total animal/animal product receipts are expected to increase even more from the previous year, by $55.3 billion (28.3%), following increases in receipts for all categories of animal/animal products.

These increases would put total cash receipts in 2022 at their highest level on record, even after adjusting prior years for inflation.

Government Payments

While cash receipts overall are expected to increase in 2022, lower direct government payments and higher production expenses are expected to moderate income growth.

Direct government payments are forecast to fall by $12.8 billion (49.7%) from 2021 to $13.0 billion in 2022. The decrease is expected largely because of lower supplemental and ad hoc disaster assistance for COVID-19 relief in 2022 compared with 2021.

Total Production Expenses

This number, including operator dwelling expenses, are forecast to increase by $66.2 billion (17.8%) to $437.3 billion (in nominal terms) in 2022.

Spending on all categories of expenses is expected to rise with the largest increase in fertilizer-lime-soil conditioner expenditures, up 44%.

Average Net Cash Farm Income

USDA forecasts farm businesses to fall 3.3% from 2021 to $98,200 per farm in 2022 (in nominal terms). However, the regional average net cash farm income outlook is mixed.

For farm businesses located in the Northern Crescent region, average net cash farm income is forecast to increase in 2022, but it is forecast to decline for farm businesses in all other regions when adjusted for inflation.

Farm businesses specializing in dairy are expected to see the largest growth in average net cash farm income in 2022, while those specializing in wheat, cotton, and specialty crops are expected to see the largest declines in 2022.

Farm Sector Equity

Ag equity is expected to increase by $315.6 billion (10.4%) in 2022 to $3.34 trillion in nominal terms.

Farm sector assets are forecast to increase $337.5 billion (9.7%) in 2022 to $3.84 trillion following expected increases in the value of farm real estate assets.

Farm sector debt is forecast to increase by $21.9 billion (4.6%) in 2022 to $496.0 billion in nominal terms but it is forecast to fall by 1.2% when adjusted for inflation.

Debt-to-asset levels for the sector are forecast to improve from 13.56% in 2021 to 12.93% in 2022.

Working capital, which measures the amount of cash available to fund operating expenses after paying off debt due within 12 months, is forecast to fall by 2.6% in 2022.

For more details, visit USDA ‘s site.

More on ag business:

Why You Need to Understand Adjusted Gross Income
USDA Doubles Down on Equipment Gains

2021 Livestock Market Outlook Roundup

Wed, 05 Oct 2022 18:44:12 GMT

The editors at AgWeb.com are looking at experts’ projections for a variety of commodities in 2021 to help you succeed and be profitable in the coming year. Here’s a look at what analysts are expecting for the upcoming year in the protein segments.

2021 Beef Outlook: New Challenges, New Opportunities

(Farm Journal)

Disruptions to the beef industry from the COVID-19 pandemic will likely linger into 2021, but the result may not be all bad for producers, Don Close, animal protein analyst at Rabo AgriFinance told AgriTalk.

Read more.

U.S. Pork Outlook: Will 2021 Be Different?

(Farm Journal)

Five respected economists in the pork industry share their insight on what’s ahead in 2021 and ways producers can make the most of new opportunities ahead.

Read more.

2021 Milk Price Outlook: Throw the Crystal Ball Out the Window

(Farm Journal)

Government intervention creates a level of uncertainty that makes a 2021 milk price forecast nearly impossible.

Read more.

2022 Weather Outlook: La Niña’s Encore

Thu, 30 Dec 2021 19:05:36 GMT

How will she impact drought conditions in 2022?

She’s back. La Niña has developed for the second consecutive year and is expected to last into early 2022.

“This could lead to a return of warm and dry conditions in the new year from southern California to the Southern Plains,” says Brad Rippey, USDA meteorologist. “Areas to the North may fair better, and Midwest areas could turn stormy this winter.”

How La Niña impacts and changes the current drought landscape will be key.

“As of early December, more than 55% of the country is experiencing drought,” Rippey says. “It’s the highest of almost nine years.”

(Farm Journal)

Regions with early-year dryness could be problematic for the Corn Belt, adds Eric Snodgrass, Nutrien Ag Solutions principal atmos-pheric scientist.

“I’ll be watching from Texas to South Carolina because if we see drought development there, it could be an early-season indicator drought could expand North in the growing season,” he says.

(Farm Journal)

WHAT TO WATCH

Beyond La Niña, Snodgrass is watching water temperatures in the Gulf of Alaska.

“The waters there are very cold,” he says. “If they stay cold until next spring or summer, I don’t like that for the Midwest. That’s because there is a decent correlation with cold water in the Gulf of Alaska and the potential for drought in Minnesota and nearby states.”

Here are additional 2022 outlook stories:

2022 Soybean Planting Projections are a Moving Target, Prices will Whipsaw

Drought and Demand Drive the 2022 Wheat Outlook

2022 Outlook: Why Corn’s Sweet Spot May Be Below $6 in the New Year

2022 Outlook: Pork Industry Rises from the Rubble

Don’t miss Eric Snodgrass’ preview of 2022 weather at the Top Producer Summit. Register now at TPSummit.com.

Cattle Outlook Optimistic for 2022

Thu, 30 Dec 2021 16:00:54 GMT

Optimism is building in cattle country that 2022 will finally deliver a long-anticipated bull market for cattle. Ranchers and cattle feeders saw markets turn higher in the final weeks of 2021, and while many of the challenges facing the industry last year will continue, most analysts suggest improving prices are a trend that will continue beyond this year.

“Demand for beef, both domestically and in our exports markets, was strong throughout 2021 and will continue,” says John Nalivka, Sterling Marketing, Vale, Ore. “With declining cattle numbers, we’re seeing things fall into place for better cattle markets the next couple of years.”

Market-ready supplies of fed cattle have tightened and packers are actively chasing cattle for the first time in many months. In general, cattle prices are higher now compared to a year ago and are expected to continue improving in 2022.

Such sentiment is shared by industry analysts across the country who see robust demand continuing as the industry has worked through many of the pandemic-related challenges. CattleFax CEO Randy Blach said the cattle cycle should have seen a peak in 2020, but it was pushed back by pandemic-related slaughter bottlenecks.

“This has been a long, hard-fought battle,” Blach said. “Retail beef prices have gone up substantially and demand has been out of this world. Cattle prices just haven’t shared in that move up until now.”

Demand has been very strong for all proteins, including pork and poultry, he said.

“All the proteins have benefitted from this demand push that we’ve experienced.”

Demand may be good, but tightening supplies are the primary factor influencing analyst’s optimism.

“Cattle numbers are declining as low prices and drought have both led to herd liquidation over the past two years,” Nalivka says.

In fact, U.S. beef cow slaughter was 10% higher in 2021, and that followed a 3% increase from 2020.

“We saw the highest beef cow slaughter last year since the drought year of 2011,” Nalivka says. “From 2011 to 2013 the drought, beginning in the Southwest and moving to the Midwest, pushed the beef cow herd numbers in 2014 to its lowest point since 1952.”

With dairy cow slaughter up roughly 3% in 2021, total cow slaughter posted a 6% increase and the highest since 1996. With those slaughter numbers, Sterling Marketing projects the 2022 beef cow inventory to be 30.2 million, a reduction of roughly 1 million cows, or 3%.

Additionally, heifer slaughter in 2021 was the highest since 2011. Nalivka projects 2022 heifer slaughter to be 4% lower than 2021 and just marginally higher than during 2012.

“The higher beef cow and heifer slaughter numbers that we saw in 2021 mean reduced cattle numbers for 2022 and likely through 2024 are evident,” Nalivka says. My forecast for the January 1 total cattle inventory is 91.25 million, down 2% from the beginning of 2021, the lowest since 2015, and 475,000 more than the beginning 2012 cattle herd.”

A reduction of the breeding herd will translate into a reduction in cattle slaughter. Nalivka expects total slaughter to be down 2% in 2022 after the 3% increase found in 2021.

“I also expect carcass weights to decline this year as fed cattle numbers decline and feedlots are increasingly current with showlists and marketing cattle into a stronger market,” Nalivka said. “Assuming a 1% year-over-year drop in carcass weights, beef production in 2022 will be down 3%.”

Overall, Nalivka projects the total red meat and poultry supply, per capita, to decline about 0.5% to 220.7 pounds in 2022.

“Even if demand weakens somewhat, prices across the beef complex – including fed cattle, feeders and calves – will post notable gains during 2022,” Nalivka says. “That is further supported by global beef demand.”

In fact, beef export values soared last year and were expected to exceed $10 billion, according to USDA.

Beef exports reached 115,709 metric tons in October, up 7.5% from a year ago, while export value climbed 48% to $956.9 million – the second-highest total on record, behind August 2021. Through the first 10 months of the year, beef exports totaled 1.19 million metric tons, up 17% from a year ago. Export value increased 38% to $8.53 billion, surpassing the 2018 record ($8.33 billion) with two months to spare.

U.S. Meat Export Federation president and CEO Dan Halstrom acknowledged red meat exports face transportation challenges and rising input costs, yet he expected red meat exports would reach about $18 billion in 2021.

“While global demand is tremendous and we are cautiously optimistic about further growth in 2022, supply chain pressures are not easy to overcome and are a growing concern for exporters and their international customers,” Halstrom said.

How High Can Farmland Prices Go?

Wed, 29 Dec 2021 19:43:48 GMT

Prepare for a dynamic farmland market in 2022

The supply-and-demand equation for farmland has shifted. For the past few years, a low supply was met with weaker but adequate demand. So, prices were supported and somewhat steady. In 2021, higher commodity prices and inves-tor interest boosted demand and supply followed suit.

“Over the past 12 months, most areas of the Grain Belt have experienced an increase in the amount of land sold,” says Randy Dickhut, senior vice president of real estate operations for Farmers National Company. “A number of states have seen a 10% or more bump in the number of transactions.”

In 2021, R.D. Schrader, president of Schrader Real Estate and Auction Co., says his firm had twice as many sales above $10,000 per acre as they did in 2019 and 60% more sales above $10,000 per acre than 2020.

“One two-week stretch, ending October and beginning November, provided four sales over $13,000 per acre in In-diana and Ohio,” he says. “It was not unheard of for land to bring 150% of what it had been appraised for in the last year, especially if recreational land was included.”

MORE RECORDS AHEAD?

During the second half of the year, it seemed like every sale was a new record, says Doug Hensley, president of real estate services for Hertz Farm Management. Will this incredible price strength continue?

“In 2022, we may see some new records, but it won’t be at every sale like it seemed to be in 2021,” Hensley says. “I expect the volume of sales to moderate, as some demand has been satisfied. Plus, in 2022, we’re seeing smaller cash flow margins and the potential for higher interest rates, both of these are headwinds compared to 2021.”

At this point, if the fundamental factors supporting land prices continue in the current direction, the market should be firm to somewhat higher, Dickhut says.

“But if any of these underlying factors change or unexpected world or national events come about, the land market could pause and even change direction,” he says. “For now, the outlook for the land market is positive as farmland continues to be a safe, long-term investment.”

(Farm Journal)

Here are additional 2022 outlook stories:

2022 Soybean Planting Projections are a Moving Target, Prices will Whipsaw

Drought and Demand Drive the 2022 Wheat Outlook

2022 Outlook: Why Corn’s Sweet Spot May Be Below $6 in the New Year

2022 Outlook: Pork Industry Rises from the Rubble

2021 Beef Outlook: New Challenges, New Opportunities

Tue, 22 Dec 2020 22:30:32 GMT

Disruptions to the beef industry from the COVID-19 pandemic will likely linger into 2021, but the result may not be all bad. That’s the assessment of Don Close, senior animal protein analyst at Rabo AgriFinance.

“We are set up for an incredibly interesting, but challenging year,” Close told AgriTalk host Chip Flory Wednesday, Dec. 9. “We have a large inventory of cattle in place for the first and early second quarter (of 2021). But because of the contraction in cow inventory we’ve had for each of the previous two years, the calf crop going forward is smaller.”

Close said that lower inventory of calves from 2019 and 2020 will show up in on-feed inventories beginning in late-spring of 2021. That will result in some counter-seasonal prices for fed cattle.

“I think it’s likely the October (2020) cattle on feed number will be the largest on-feed inventory we see for the next several years,” Close said. “We could be setup for a counter-seasonal year where we don’t see the highest prices (for fed cattle) in March and April. As fed cattle supplies tighten (in 2021), we could actually see third and fourth quarter (2021) prices exceed our second quarter highs.”

For cow-calf producers, Close said the smaller supplies of feeder cattle will support prices, but his biggest concern is the expanding drought conditions across the western United Sates that he believes will “further accelerate the liquidation of cows. I’m not sure that’s all bad, because it will get us to the bottom of this cycle in the market faster.”

Flory noted the coronavirus pandemic caused major disruptions to the meat packing sector, notably from lant closures and slowdowns that created a “backlog” of cattle in feedyards. He asked Close if there remains a supply hangover.

“In May (the industry believed) there was one million head of fed cattle backlogged,” Close said. “I agree with that assessment, but by September and October that backlog was pretty well resolved. But, we have a second wave we’re going to have to deal with.”

The second wave of cattle was created by the backlog of cattle outside of feedyards at the time the pandemic hit that were delayed going on feed. Close said those cattle showed up in heavy placement numbers from June through September and resulted in a record number of cattle on feed in USDA’s October 1 report.

“That will be our fed cattle supply from late December and working through the first quarter and into the second quarter of 2021,” Close said.

Flory asked Close if he foresees a repeat performance ahead similar to the disruptions at experienced by packing plants at the outset of the pandemic.

“It won’t be anything nearly as disruptive as it was the first time (if it occurs),” Close said. “The reasons are that packers have the PPE equipment in place, and in the aggregate we know so much more about handling the disease and how it spreads than what we knew initially. Also, the packing plants have made adaptations – monitoring staff, taking employees out of high-risk situations, etc.”

The North American Meat Institute says the packing industry has spent over $1 billion on equipment and alterations in response to COVID-19, and Close believes that takes a degree of risk out of the fed cattle market for cattle feeders.

“We’re still dealing with a degree of uncertainty, but if you look at this entire stay at-home period, beef demand has been incredibly good, in part because of the increase in disposable income,” Close said.

The pandemic shuttered many restaurants, but it also drove consumers to buy more beef at retail and many consumers increased their home cooking skills. Close said while that demand shifted from food service to retail, many consumers found they had more disposable income. Unemployment rose due to the pandemic, but for those who didn’t lose their jobs but were forced to work from home, expenses were reduced for items such as fuel for transportation to work, work lunches and even office attire.

“Many are using that disposable income to eat better at home,” he said.

Once the pandemic ends, Close believes there will be a lot of pent-up energy that will drive a boom in restaurant eating again.

2017 Outlook: Cattle Forecast Bleak, But With Some Opportunities

Thu, 19 Nov 2020 00:52:42 GMT

In two short years cattle markets have flipped from record highs to depressing lows. The supply-starved market that brought record prices in the fall of 2014 are but a distant memory. Ranchers shipped semi loads of calves to market this fall that were valued at $70,000 less than the same trailer loads in 2014.

“How did this happen,” and “What does it mean going forward?” Those questions are foremost on rancher’s minds this year.

“Profits plus grass equals expansion,” says John Nalivka, president of Sterling Marketing, Inc., Vale, Ore. “We saw rapid herd rebuilding for two years as both cow and heifer slaughter were down sharply. Beef cow slaughter was down 14% in 2014 followed by a 4% drop in 2015. And while sharply reducing herd culling in order to take advantage of higher prices, cattlemen also bred more heifers. Heifer slaughter fell 8% in 2014 and then was down another 12% in 2015.”

Nalivka calculates average profit per cow in 2014 was $518. That was the economic incentive to expand herds and Mother Nature cooperated with adequate moisture for grass and forage production across most of cattle country.

The current supply-demand equation traces back to the Jan. 1, 2014, inventory report which counted 87.7 million head, with 29 million beef cows. The tally was the lowest number of beef cows since 1951, a result of the prolonged drought across much of the Central Plains. The small number of cows contributed to a shrinking supply of feeder cattle and the subsequent record prices posted in the fall of 2014.

The expansion of 2015 and 2016 led to increased beef production – 5.8% more in 2016, and another 4.4% increase is projected next year by USDA’s National Agricultural Statistics Service. But beef is just part of the puzzle.

“Per capita supplies of total red meat and poultry will be 7% higher this year, and increase another 8% next year,” Nalivka says.

And there’s more on the way. The Livestock Marketing Information Center, Denver, CO, projects increasing supplies for both beef and pork during every quarter in 2016, 2017 and 2018. Enough, USDA projects, to provide 218 pounds of red meat and poultry on a per capita basis by 2018, an increase of 16 pounds per person from 2014.

The growing glut of red meat is reflected in cattle prices and profit margins. Sterling Marketing produces a weekly Profit Tracker for both beef and pork finishing programs. Red ink has flowed in closeouts for both cattle and hog producers this fall, with last week’s data showing losses of $116 per head for cattle and $35 per head for hogs.

For ranchers, the declines in feeder cattle and calf prices have been devastating. Oklahoma City auction prices for 750-800 lbs. feeder steers were 35% lower in October than the same period in 2015. Calves weighing 450-500 lbs. at the same auction were 38% lower in October 2016.

The October 2015 prices were 25% below the 2014 peak of $299 per cwt. Still, ranchers saw average per cow profits of $433 last year, Nalivka says. “This year I’m projecting a 65% decline in per cow profits to about $154.”

And that may be the best return ranchers see for a while. Given the Sterling Marketing price forecast, Nalivka projects ranchers will lose an average of $24 per cow next year.

“I project we will see another 14% to 16% decline in the price for feeder cattle and calves next year,” he says. “I am projecting a third quarter price of $118 per cwt for Oklahoma City yearling feeders, and $136 per cwt for calves.”

Additionally, Sterling Marketing forecasts show fed cattle prices in the third and fourth quarter of 2017 at $95 and $96, respectively, with an annual average of $100. If accurate, that would represent a $48 decline in the annual average for fed cattle from 2015.

While those forecasts seem bleak, there are opportunities.

Derrell Peel, Oklahoma State University extension economist says, “Retained ownership may be attractive for cow-calf producers depending on calf weaning weights and management flexibility.” And he says the price roll-back on calves this fall may offer opportunities for stocker operations. “Not only does the current market suggest stocker opportunities in general but also that the best buying opportunities are for animals somewhat heavier than typically purchased for winter grazing.”

Nalivka agrees that backgrounding your calves may prove profitable.

“If you already have the forage, backgrounding can be an appealing option,” he says. “As long as your marginal cost of an added pound does not exceed the marginal revenue from that additional pound of beef, the economics are on your side. The key – you must know your costs of forage (if produced) and your cost of gain for backgrounding whether in a dry lot or on grass.”

Those opportunities may also carryover to finishing programs.

“Current retained ownership in the feedlot continues to look positive based on the feeder cattle market and expected breakevens based on the cattle cost and feed cost – both are down sharply,” Nalivka says. “However, there is plenty of pessimism concerning the 2017 steer prices.”

The editors at AgWeb.com are taking a look at experts’ projections for a variety of commodities in 2017 to help you succeed and be profitable in the coming year. Tune in periodically over the next six weeks as we add outlooks for corn, wheat, cotton, cattle, machinery and more. Read all the outlook pieces here.

Outlook

Thu, 19 Nov 2020 00:52:39 GMT

Ag dealer nonpayments

Nonpayment claims filed against ag product buyers doubled in the first six months of fiscal 2008–09, from 56 claims in each of the past four years to 115, reports Florida’s Department of Agriculture and Consumer Services. “The rise in claims filed indicates that dealers are being impacted by the current economic conditions,” says the state’s Ag Commissioner Charles Bronson. —Linda H. Smith

Oil overflowing as demand drops

Demand has been rationed not just for ag commodities, but for energy as well. Global oil demand, which was supposed to grow unabated, has stalled, says Phil Flynn, vice president and energy analyst with Alaron Futures and Options.

“Supplies at Cushing, Okla., where the world benchmark price is set, are at an all-time high,” he says. In fact, we’re almost out of space to store it, he adds. “Because land storage cannot be found, they are now storing oil on ships. Right now, just floating around in the ocean somewhere, there are oil supertankers filled with about 80 million barrels of crude—oil that in many cases is having a hard time finding a port to unload. This is the most oil in floating storage in at least 20 years.”

The seeds of the next boom are being planted right now. “Current lower prices mean half of current or planned production capacity is at risk,” says Aaron Brady of Cambridge Energy Research Associates. “So there is upside price risk during 2010.” His estimate is the $60/barrel range, “unless the economic slump lasts longer and oil enters a superslump.” —Linda H. Smith

Herds on a downswing

For the first time since 1973, beef, pork and poultry production all are dropping, Shayle Shagam, USDA livestock economist, told USDA’s Outlook Forum. Meat exports, now equal to almost 20% of production, will drop for the first time since 2004. “We’ll see generally weaker prices for all the meats except broilers,” he said.

The Jan. 1 beef cowherd was the smallest since 1963 and the beef calf crop the lowest since 1951, he reported.

A potential wild card is lack of moisture in the Southern Plains, says Steve Kay of Cattle Buyers Weekly. “Beef cow numbers have not been reduced in drought states,” he says. “Texas had 25% of normal precipitation through winter, but cow numbers were not down at all. Neither were numbers in Kansas, and Oklahoma was down only marginally. Should the drought continue, there eventually could be a big liquidation.” —Linda H. Smith

One-liners

“We will harness the sun and the winds and the soil to fuel our cars and run our factories.” President Barack Obama

“30 billion DOllars in crops WERE lost to drought in 2008.” U.S. Ag Secretary Tom Vilsack

Hedges back in favor

Unlike last year, when futures hedges resulted in major deductions from market value for the advisers in our track records, several now have positive values.

“Last year, the influence of index funds made it difficult to make effective marketing decisions,” says Scott Harms of Archer Financial. “Now, that influence seems to have been reduced and advisers should be able to make more confident decisions. They are performing well in this more normal environment and I expect that may continue.”

Top Producer, Spring 2009