Spring 2003, Vol. 9 No. 2
In this issue...
Iowa's Agricultural Situation
The March 31 USDA Prospective Plantings report lowered the national corn acreage and slightly raised the soybean acreage relative to the market expectation. According to the report, U.S. growers plan to sow 79 million acres of corn in 2003, which is unchanged from the previous year's level and close to the five-year average. Most states in the Great Plains region reported a decrease in the intended corn plantings because of possible drought conditions and higher fertilizer and energy prices. This decline is offset by increases in prospective corn plantings by growers in the eastern Corn Belt who shifted into soybeans last year because of the wet season. U.S. soybean producers are projected to plant 73.2 million acres, down 1 percent from 2002. The expected soybean acreage is the lowest in the last five years and is slightly lower than the five-year average of 73.6 million acres. Counteracting the national trend, soybean acreage is expected to increase in the northern Great Plains as well as some areas in the south.
Traders were astounded by the higher-than-expected prospective corn acreage reported. While market analysts cite input costs, crop rotation patterns, and changes in loan rates as potential motives behind the planting intentions, they point out that the final plantings likely will be influenced by future developments. According to the latest USDA Grain Stocks report, national corn and soybean stocks were estimated at 5.13 and 1.2 billion bushels as of March 1, down 11 and 10 percent respectively from last year's levels. Because of increases in corn fed to livestock and used for ethanol, domestic use of corn was 4 percent higher this winter than a year ago. Corn futures prices jumped after release of the positive news in the reports but subsequently leveled off in view of disappointing corn exports. Soybean prices remained high, in spite of the negative news contained in both reports, mostly owing to strong export demand running well ahead of USDA's export projections and to continuing delays in shipments of the large South American crop.
In Iowa, intended corn and soybean acreages for 2003 are unchanged from last year's levels at 12.3 and 10.4 million acres respectively.
According to the report, the prospective acres sown to crop varieties developed using biotechnology attained a record share of 38 percent, up 6 percentage points from 2002.
Nationwide, the split of biotechnology varieties present in the 2002 corn crop was 22 percent to Bacillus thuringiensis (Bt) insect-resistant corn, 9 percent to herbicide-resistant corn, and 2 percent to a stacked gene variety having both insect and herbicide resistance. Statewide, 41 percent of the 2002 Iowa corn crop was genetically modified: 31 percent was Bt corn, while 7 percent was herbicide resistant and 3 percent was a stacked gene variety. The 2003 intentions survey shows nationwide that corn producers intend to increase their Bt corn plantings by 4 percentage points, while the shares of their acres planted to herbicide-resistant varieties remain unchanged, and stacked gene varieties will increase by only 1 percentage point. Iowa growers intend to sow 47 percent of their corn acreage to genetically modified varieties. The share of intended Bt corn increases to 38 percent, the share of stacked gene corn increases to 4 percent, and the share of acreage planted to herbicide-resistant corn falls to 5 percent.
Nationally, the intentions for 2003 show continued growth for herbicide-resistant soybeans, with 80 percent of the soybean crop allocated to biotechnology varieties compared with 75 percent last year. Iowa soybean producers indicate that 82 percent of the new crop will be herbicide resistant compared to 75 percent in 2002.
The March 28 USDA Hogs and Pigs report indicated an expected decline in hog numbers and the continuing liquidation of the breeding herd. The inventory on U.S. farms is lowered to 58.1 million head of hogs, down almost 2 percent from both a year ago and last quarter. The breeding herd, at 5.96 million head, is 4 percent below last year's level and 1 percent below the level of the last report. The March inventory of market hogs, at 52.2 million head, is 2 percent below last year and 3 percent below the December inventory, which is indicative of lower marketings this spring and summer compared with last year. Consistent spring and summer farrowing intentions reported by U.S. hog producers are both 3 percent below the actual farrowings at these periods last year, suggesting that marketings this fall and winter will also fall considerably lower than last year's levels.
However, the report had little positive impact on prices, as markets waited for further symptoms of moderating hog slaughter in light of the recent discrepancy between the actual slaughter numbers and the numbers calculated from the official reports. Market observers speculate that the projected lower beef and poultry production is likely to help sustain the hog price rebound. Pork stocks in cold storage continue to exceed last year's levels but are expected to decline in the future. Having achieved significant rates of growth in pork exports, the pork industry is now more exposed to volatile international markets, as well as foreign meat safety regulations, trade barriers, foreign competition, and freight costs. Accounting for changes in productivity, strong demand for bacon, and new pork products, prices are expected to reach levels profitable for producers this summer before declining in the fall, according to some estimates.
In Iowa, the inventory of market hogs was estimated at 14.9 million head, down 1.3 percent from March 2002, a bit lower than the nationwide level. However, the state's breeding herd showed a significant drop of 7.1 percent, indicating a higher number of out-of-state feeder pigs.
Statewide cash receipts, at $11.16 billion, fell slightly in 2002 compared with last year's receipts but are nearly on a par with the five-year average. While the revenues in the crop sector rose 11 percent, cash receipts for livestock fell 14 percent below last year's income. The increase in crop cash receipts has been reflected in rising cash rental rates for cropland. Iowa cropland rates averaged $120 per acre, up $3 from last year. Fiscal year government payments for Iowa fell from $2.302 billion in 2000 to $1.972 billion in 2001, mostly because higher grain prices reduced payments under marketing loan programs. ♦