April 12 - The words “tight” and “volatile” were used frequently to describe agricultural markets at the Kansas Ag Bankers Conference recently in Manhattan, Kan. Sponsored by the Kansas Bankers Association, the event was held in the Kansas State University Alumni Center.
The overall theme was summarized succinctly by one of the speakers, Darrell Holaday, president of Advanced Marketing Concepts of Wamego, Kan., which works directly with agricultural producers and food companies in developing and executing marketing plans.
“You can analyze the situation from many different angles, but the reality is that U.S. supplies of grains, oilseeds, forages and beef are extremely tight,” Holaday said in his presentation. “Price movement will be very erratic and unstable until we have a better feel for the spring and summer weather.”
Corn is still king and will determine overall price direction, according to data Holaday showed the Kansas bankers. The near-term equilibrium in futures is $7.50. U.S. corn acres will likely increase by 2 million, but yield is the most critical element now. Downside price potential is substantial if U.S. corn yield hits 156 bushels per acre or better. The basis will remain strong into the early part of the crop year.
Holaday cited these statistics for soybeans: The South American crop is big, but a little smaller than early potential. Chinese demand will not end. U.S. soybean acres will increase slightly by 500,000 to 1 million acres. The near-term equilibrium price is $15. The downside price potential is $10–$11 if U.S. yield is 42 bushels per acre or larger.
The outlook for wheat is as follows, according to Holaday: The U.S. hard red winter wheat crop is already damaged, but recent moisture has been very helpful. U.S. soft red winter wheat is in good condition. The world stock situation is not as tight as other products, but is becoming tighter. Russia should be watched as key to price movement. Wheat is being consumed as a feed grain. Wheat prices at harvest will be the highest of the year if there is no U.S. summer drought.
Tight supplies also characterize the beef industry, according to Randy Blach, CEO of CattleFax of Englewood, Colo., a leading member-owned source of cattle and beef market information, analysis and research.
Using U.S. Department of Agriculture data, the outlook for 2013, as Blach described it for the Kansas bankers, includes a drop of 860,000 head in the beef cow inventory to 29.3 million head; next year looks “flat at best.” The steer and heifer slaughter should drop by 470,000 to 25.4 million head, following a drop of 900,000 in 2012 to 25.8 million head. Net beef production was 6.4 billion pounds in the fourth quarter of 2012; dropped to 6.32 billion pounds in the first quarter of 2013; and is projected at 6.04 billion pounds in the fourth quarter of this year.
Other points in materials presented at the conference by Blach:
Jason Henderson, vice president and Omaha branch executive for the Federal Reserve Bank of Kansas City, concluded the KBA program with his discussion of the frequently asked question, “Is This Farm Boom Different?” His conclusions:
Henderson also asked the questions: