Spring 2002, Vol. 8 No. 2
Iowa's Agricultural Situation:
Analysts expect a shift from soybeans to corn and more biotech plantings
As Iowa farmers decide on what to plant this year, market prices are quick to respond to any news about supply side and international trade developments. The March 28 U.S. Department of Agriculture (USDA) Prospective Plantings report confirmed analysts' expectations of an overall shift from soybeans into corn compared to last year. According to the report, U.S. growers plan to sow 79 million acres of corn in 2002, up 4 percent from 2001 but only slightly above the five-year average. Most of the growing regions reported an increase in the expected corn acreage except for a few states with concerns about dry conditions. However, unlike last year's wet planting season, so far this year's weather appears to be favorable to corn growers. U.S. soybean producers are projected to plant 73 million acres, down 2 percent from the previous year but on a par with the five-year average. The markets largely anticipated the results of the report and, as expected, responded with lower corn and higher soybean prices. However, in subsequent trading days, corn prices have rebounded somewhat with the news of steady exports and potential delays in planting in some midwestern states, while soybean prices have slipped because of imminent South American supply.
On the positive side for both crops, corn and soybean stocks were recorded at 5.8 and 1.3 million bushels as of March 1, down, respectively, 4 and 5 percent from last year's levels. The report suggests that, in addition to prices, crop rotations and farm bill uncertainty played a role in producers' intended acreage allocations. Along with the uncertainty surrounding the federal farm program, USDA intentions to adjust loan rates for corn and soybeans to reflect the current market price conditions and the timeliness of rains for soil across the nation will factor into growers' planting decisions. In Iowa, with the nation's largest acreages of both corn and soybeans, intended corn acreage for 2002 is 12 million acres, up 3 percent from the 2001 level. Intended soybean acreage is 10.8 million acres, down 2 percent from a year ago.
According to the report, crop varieties developed using biotechnology continue to gain momentum and amount to 32 percent of the national corn acreage, up 6 percent from 2001 but still 1 percent below the highest estimated share attained in 1999.
Nationwide, the split of biotechnology varieties present in the 2001 corn crop was 18 percent Bacillus thuringiensis (Bt) insect-resistant corn, 7 percent herbicide-resistant corn, and 1 percent a stacked gene variety having both insect and herbicide resistance. The 2002 intentions survey shows nationwide that corn producers intend to grow 4 percent more Bt corn but only 1 percent more herbicide-resistant and stacked gene varieties.
Statewide, 32 percent of the 2001 Iowa corn crop was genetically modified: 25 percent was Bt corn, while 6 percent was herbicide resistant corn, and 1 percent was a stacked gene corn variety. Iowa appears to be ahead of the national trend of accelerating biotechnology adoption; in 2002, Iowa corn growers intend to sow 43 percent of their crop acreage to genetically modified varieties, increasing use of Bt, herbicide-resistant, and stacked gene corn by 30, 9, and 4 percent, respectively.
In 2001, a majority of the nation's soybean crop was genetically modified, with 68 percent of soybean acres planted to herbicide-resistant varieties. In Iowa, the percentage was even higher, at 73 percent. The intentions for 2002 show continued growth for herbicide-resistant soybeans. Nationally, producers indicate that 74 percent of the soybean crop will be of a biotechnology variety. Iowa soybean producers indicate that 78 percent of the new crop will be herbicide resistant.
The March 28 USDA Hogs and Pigs report raised the inventory on U.S. farms to 58.7 million head of hogs, up 2 percent from a year ago. While the breeding herd is similar to that of last year, the March inventory of market hogs is up 2.3 percent. Summer and fall pig crops are expected to stay within last year's levels, but the winter slaughter is projected to rise 3 percent. Analysts predict that winter slaughter may reach 1998 levels because of an increase in Canadian hogs and pigs in U.S. markets and larger-than-expected increases in spring farrowing intentions. A slowing in the increase of domestic pork supply may occur later, as farrowing intentions for spring and summer are less than 1 percent higher than a year ago. In Iowa, the inventory of market hogs was estimated at 14.9 million head, up 3.5 percent from March 2001. However, the state's breeding herd is the same as last year, indicating a higher number of out-of-state feeder pigs.
According to one estimate, the United States exported a record 1.563 billion pounds of pork in 2001, which amounts to 8.17 percent of national production. Despite dedicated efforts to become more competitive in international markets, compared to last year, U.S. pork exports are not as strong because of the stabilization of the foot-and-mouth disease outbreaks in Europe and Japan.
Average hog prices fell from $38.5 per hundredweight in February to $36.3 in March, down 20 percent from a year ago. Falling prices can be blamed on large supplies of beef and poultryï¿½pork's immediate competitorsï¿½along with pork stocks fixed at 505.3 million pounds as of February 28, up 7.9 percent from last year. Market analysts predict that prices will remain at marginally profitable levels this spring and summer but will likely take a dangerous dip during the winter season.
Statewide cash receipts rose in 2001. Total cash receipts of over $11 billion exceeded 1998 levels but have not reached the $12.8 billion received in 1997. Unlike last year, most of the increase came from the crop sector. Crop cash receipts rose by $38 million between 2000 and 2001, while livestock accounted for only $12 million of the total increase. The increase in crop cash receipts has been reflected, to a certain extent, in rising cropland cash rental rates that averaged $117 per acre of Iowa cropland, up $2 from last year. In addition, government payments continue to increase, as they've done every year since 1996. Fiscal year government payments for Iowa rose from $2.062 billion in 1999 to $2.302 billion in 2000.
Editor's Note: Beginning with this issue, we're adding a graph for Iowa milk prices (p.7) in response to a reader's suggestion. ♦