In today’s global economy, local supply and demand are just a part of the environment that determines what livestock producers pay for feed ingredients. Iowa State University economist Robert Wisner cites four major elements behind the recent weakness in U.S. corn and soybean prices:
- StarLink and lagging corn exports,
- Forecasts for a very large increase in South American soybean production, up about 200 million bushels from last spring, with over two-thirds of the increase coming from Argentina,
- Expectations that U.S. soybean plantings will be up substantially again this spring, and
- Concern that the European Union may be forced to severely reduce its livestock populations.
Some grain traders, Dr. Wisner notes, initially may have thought the EU would reduce hog numbers by the 33- to 38-percent cut Taiwan experienced in 1998. But, he says, a decline of this amount is not presently indicated for EU. Nevertheless, soybean exports from Sept. 1 through March 8 and outstanding unshipped export sales were up 12 percent from a year earlier. China has been a very strong buyer of soybeans again this year, he says, accounting for a significant part of the increase. The six-month EU ban on meat and bone-meal feeding also has created a substantial demand for alternative protein feeds, primarily soybean meal.
But as international demand for U.S. soybeans seems strong, supplies also appear to be growing. South America apparently has a large soybean harvest this spring, and U.S. soybean plantings could be up two and one-half to four million acres from last year.
In contrast to soybeans, Dr. Wisner says, U.S. corn exports are lagging badly, with the total from last Sept. 1 through March 8 and outstanding unshipped export sales down 9 percent from a year earlier. Relatively stronger new-crop prices for corn than for soybeans reflect expectations of a sharp decline in U.S. corn acreage this spring.
Grain traders and livestock producers will pay close attention to the March 29 Planting
Intentions Report, which will be an important market indicator for new-crop prices of both corn and soybeans. If farmers reduce their corn acreage significantly in favor of soybeans, prices could become fairly volatile through the summer months, especially if weather conditions appear to threaten yields.