WILLAg Notes

July 16, 2015

Still Uncertainty About New Crop Corn

The rain fall throughout the corn belt has built a great deal of uncertainty around the size of this year’s corn crop as predicted by the United States Department of Agriculture says University of Illinois Ag Economist Darrel Good. He thinks the amount of this “uncertainty” is more than usually the case.

Crescent City, Illinois corn field July 15, 2015

USDA released projections for the 2015–16 corn marketing year July 10th. The next update is due August 12th. The new crop corn marketing-year ending stocks of corn are currently expected to be 172 million bushels smaller, and the average farm price is expected to be $0.25 higher, than projected a month earlier. Those are the numbers in question. Both are related to the size of this year’s crop, and the ILLINOIS agricultural economist has some thoughts on the “unknowns” as it relates to risk and price.

Quote Summary - In years with substantial production uncertainty, prices tend to be above the subsequent marketing year average during the growing season, offering producers the opportunity to forward price a portion of the crop. That pattern seems to be unfolding this year. New crop corn prices are currently above both the spring price for crop revenue insurance and above the upper end of the range of the USDA’s marketing year average price projection. Still, prices could trade in a relatively wide range over the next 10 weeks. Pricing decisions remain difficult for producers, particularly for those with substantial production uncertainty.

This price risk for corn, says Darrel Good can be mitigated with a combination of incremental sales at higher prices and options-strategies that provide a floor above the crop revenue price of $4.15 for December futures.

July 10, 2015

The Consequences of a Foot of Rain in June

The rainfall in May and June has put the corn crop in a difficult position this growing season. Late in June the corn crop in eastern Illinois, north of Interstate 74, was under water. It looked bad, really bad. Oh, there was some of it that looked pretty good, but not much. Things across the border in Indiana aren’t much better, and neither, apparently, is a large part of Missouri and southern Illinois. The crop has just gotten way to much water says University of Illinois Extension Agronomist Emerson Nafziger.

July 09, 2015

Higher Feed Costs Could Mean Pork Industry Losses

Weather damaged corn and soybean fields are also harmful to hog producers. Todd Gleason has more on the reason why.

Rising feed prices mean higher production costs for the pork industry. Recent higher corn and soybean meal prices have increased anticipated hog costs by about $10 per head says a Purdue University Extension ag economist. These higher feed costs shift the pork industry outlook from one of modest profits to losses says Chris Hurt of about $6 per head over the coming 12 months.

Rising feed costs is a new concern for producers. December 2015 corn futures, as an example, rose from about $3.80 on June 24 to about $4.30 on July 6. This increases the cost of hog production by around $2.25 per live hundredweight. In a similar time period, meal futures have risen about $40 PER ton, which increases cost by about $1.25 per live hundredweight. So, recent increases in corn and soybean meal prices have increased costs by about $3.50 per live hundredweight, or by nearly $10 per hog.

Weather is a primary driver of feed prices right now so no one knows if feed costs will get much higher or more moderate from here.

In June it costs about $50 to produce a hundred pounds of pork says Chris Hurt. With current higher feed prices, costs are expected to be closer to $53.50 for the last-half of 2015 and the first-half of 2016. He cautions, of course, that feed prices can change considerably depending on weather for the rest of the growing season. Right now it means pork producers will likely breakeven this quarter, and lose about $18 a head on those hogs marketed in October, November and December.

Hog prices averaged about $48 in the first quarter of this year, with an estimated loss of $11 per head. Second quarter prices were near $56, for an estimated profit of $14 per head. Third quarter prices are expected to average about $53 per hundredweight, which is near breakeven. The final quarter this year is expected to see prices drop to near $47 with losses estimated at $18 per head.

For all of 2015, losses are expected to average about $4 per head. Recent feed price increases are the primary reason the 2015 outlook has shifted toward expected losses. What is the outlook for 2016? Hog prices are expected to be around $47 per live hundredweight in the first quarter of 2016 and rise seasonally to $54 in the second quarter. Given current corn and meal prices, this would mean an estimated loss of about $17 per head in the first quarter and a profit of $10 per head in the second quarter.

Here’s how Chris Hurt puts all this data in perspective.

  • First, he says pork producers and their allied industries are to be commended for dealing with the PED virus in late–2013 and 2014.

  • Secondly, the industry is to be saluted for only modestly expanding the breeding herd after record high profits in 2014.

  • Finally, Hurt says the higher price of feed should remind the industry to be cautious about expansion, and to follow through on intentions to reduce farrowings this summer and fall.

July 09, 2015

USDA WASDE July 2015 Numbers

U.S. Ending Stocks
2014/2015 Marketing Year (in billion bushels)


U.S. Ending Stocks
2015/2016 Marketing Year (in billion bushels)


World Ending Stocks
2014/2015 Marketing Year (in million metric tons & billion bushels)


World Ending Stocks
2015/2016 Marketing Year (in million metric tons & billion bushels)


World Production 2014/2015  (in million metric tons & billion bushels)

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