I think the most commonly issued phrase around Midwest farms in the last month has been “What A Difference A Year Makes!” Generally, it’s a positive reference to the adequate summer precipitation, good crop conditions, and expectations for a more plentiful fall harvest. Last year at this time drought gripped much of South Dakota and the Corn Belt, the severity of which hadn’t been seen in decades. Granted, many areas still are suffering from the effects of that drought and are in need of more rain. But, conditions are generally much better than last year. In fact, last year at this time, corn was being harvested for grain in southeastern South Dakota amid a heightened level of fire risk (silage had been cut in early August). Cow herds were taken off scorched pastures, calves were weaned early, and cows were being fed any alternative feedstuff available. This fall’s corn crop won’t be harvested early, leaving some to worry about the impact of an early frost. Cattle are still on pastures in eastern South Dakota during the first week of September. While nothing in agriculture is really ‘normal’, this year is shaping up to be closer to average than 2012. Yes, what a difference a year makes!
As producers gear up for a busy fall season harvesting corn and soybeans and weaning calves and working cow herds, it is helpful to have a little perspective on some of the dramatic changes in prices and conditions since last year. Table 1 reports prices for several commodities as well as some crop condition ratings. Some take-away observations from these simple comparisons include:
- New crop corn prices are $2.50-3.50/bu lower than last year due to much better condition ratings, which will likely lead to a national yield in the 153-155 bu/acre range compared to last year’s 123.4 bu/acre national yield.
- New crop soybean prices are about $4/bu lower than at this time last year, again due to much better crop production prospects. In South Dakota, more than twice as much of this year’s crop is rated good to excellent compared to last year.
- Pasture and range conditions are dramatically improved in South Dakota compared to last year. Nationally, pasture and range conditions are moderately improved, with the western U.S. still experiencing drought.
- Although alfalfa and other hay production has improved this summer, tight stocks at the beginning of summer and challenges putting up quality hay this summer have supported hay prices. Generally, the bottom of the price range has softened compared to last year, but the best quality hay can still bring as much as it did last year at this time.
- Distillers grain prices and soybean meal prices are lower than a year ago, reflecting the lower corn and soybean prices.
- Lower corn prices and tight feeder cattle supplies have resulted in feeder cattle prices averaging about $20/cwt higher than a year ago.
- Slaughter cattle prices have languished in the low $120s for much of the year, and currently are on par with year-ago prices. Expected reductions in slaughter numbers in the months to come should support fed cattle prices and help push prices closer to $130/cwt by the end of the year.
The information in Table 1 is generally well known by agricultural producers. Still, it is worth some time considering how fundamentally different markets are this year and what it means for your marketing plan for the coming year. Some questions to ponder are:
- Should I store my corn crop this year?
- Should I store my soybeans this year?
- Should I retain ownership of my calves this fall and background or finish them?
- Should I retain more heifers or buy bred cows to increase the size of my cow herd?
The answers to these questions are not the same for everyone because cost of production and risk tolerance differs amongst producers. One thing that every producer should do, though, is sharpen a pencil and evaluate the opportunities available, keeping in mind that this year is very different than last year.
The information in this report is believed to be reliable and correct. However, no guarantee or warranty is provided for its accuracy or completeness. This information is provided exclusively for educational purposes and any action or inaction or decisions made as the result of reading this material is solely the responsibility of readers. The author and South Dakota State University disclaim any responsibility for loss associated with the use of this information. There is substantial risk of loss in trading commodity futures contracts and traders should consult their brokers for a full disclosure of these risks to determine whether such trading is suitable for them in light of their circumstances and financial resources.
Source: Darrell Mark