Winter 2003, Vol. 9 No. 1
Iowa's Agricultural Situation:
USDA's year-end summaries show livestock contraction and unexpected increases in crop production
The start of a new year brings summaries of the 2002 agricultural year. These summaries have had a strong bearish impact on crop markets. Following the January 10 release of the USDA annual crop summary, soybean futures fell by 10¢ to 20¢ per bushel and corn futures fell 3¢ to 9¢. In both cases, though, the price drops have not been enough to revive loan deficiency payments. Prices remain 20¢ to 30¢ over county loan rates, a sharp contrast to this time last year when loan deficiency payments were positive for corn and over a dollar a bushel for soybeans. Even given the recent price drops, the state average corn price is 24¢ higher this year, at $2.15 per bushel. The state average soybean price is $1.30 higher at $5.45 per bushel. The market's recent downturn was driven by the surprising increases seen in the USDA's production estimates for 2002 corn and soybeans.
For corn, the USDA raised the production estimate by 5 million bushels to 9.008 billion bushels. This is roughly 500 million bushels less than the 2001 figure. The national average yield fell by more than 8 bushels per acre. However, Iowa's corn crop had a banner year. State production rose to nearly 2 billion bushels. The state average yield of 165 bushels per acre shattered the previous record yield of 152 bushels set in 1994. On the demand side, world stocks-to-use ratios are tighter now than they have been over the last couple of years. Industrial uses, such as ethanol production, are projected to increase.
For soybeans, national production is estimated at 2.730 billion bushels, a 161-million-bushel increase over the previous estimate. The national average soybean yield fell by 2 bushels per acre. Again, Iowa soybean production bucked the national trend. State soybean production rose by 14.5 million bushels to 495 million. The state average yield rose 4 bushels to 48 bushels per acre, the second highest yield in state history. World soybean stocks-to-use ratios also are lower than they have been over the past two years. Chinese import demand is seen as a major driver in the world soybean market.
Iowa's weather at the end of 2002 was also record breaking. This past December was the driest month on record for Iowa. Des Moines had a streak of at least 50 days without measurable precipitation. For the entire year, only 18 of Iowa's 99 counties reported average to above-average precipitation. Nearly half of all counties recorded at least a 4-inch shortfall in precipitation over 2002, with 13 counties (mostly in south-central Iowa) having a shortfall of at least 8 inches. Soil moisture could become a major concern. However, the emergence of El Niño does bode well for the spring precipitation outlook.
For the livestock sector, 2002 was a year of contraction. National hog breeding stock fell by 3 percent. The number of market hogs dropped to 52.9 million head, a 1 percent decrease from 2001. The September to November pig crop was 2 percent below the 2001 level. Planned farrowings are down 1 percent for the December to February period and down 3 percent for March to May. Nationally, there are just over 75,000 hog operations, a 7 percent decrease from 2001, and a 13 percent drop since 2000.
Trends in Iowa's hog production parallel the national trends. Breeding stock declined by 7 percent in 2002. Market hogs held at 14.25 million head, slightly below the 2001 figure. The September to November pig crop was down 2 percent. Planned farrowings are up 2 percent for December to February but down 4 percent for March to May. Roughly 500 Iowa hog operations ceased production in 2002, bringing the state total down to nearly 10,000 hog operations.
Local hog prices are also down from last year. The weekly weighted average price for Iowa and southern Minnesota is $42.15, down $8.20 from last year at this time. However, stronger packer demand and tighter supplies have helped boost lean hog futures over $60. Also, pork exports for 2002 were up 3 percent for the year, with most of the increase coming from Japan, Canada, South Korea, and Taiwan.
National cattle on feed numbers fell 8 percent from last year, even with increased placements and decreased marketings during November. As of December 2002, 10.9 million cattle are in feedlots with over 1,000 head. During November 2002, 2 million cattle were placed in feedlots, while 1.7 million head were marketed. For Iowa, the number of cattle on feed equaled last year's figure. November placements were up 7 percent from 2001, but marketings were down 2 percent.
Local cattle prices are up compared to last year. The average price for choice steers on a live basis from interior Iowa markets is $77.50, up $11.07 from this time last year. Tightening supplies, poor feeding conditions in some regions of the country, and winter weather concerns are helping maintain cattle prices. Demand for beef is projected to remain strong through 2003 both domestically and internationally. Beef exports for 2002 are expected to finish at record levels. ♦