Near record low stocks of soybeans and corn and wheat will keep demand for these grain products high and prices good for farmers through the 2013 season.
However, the news is not universally good for farmers. Livestock and dairy farmers will continue to be in a high stress economic situation due to continually increasing grain prices, economists contend.
Grain crops promising
Among the primary crops planted in the region, grain crops will likely remain a good crop for Southeastern growers, while traditional crops like cotton and peanuts may face a difficult time competing for acreage.
Though not considered by some to be a traditional southern crop, wheat acreage over the past few years has continued to climb, especially in the upper Southeast. Among the Southeastern states, North Carolina is by far the largest wheat producer. It is estimated that nearly 1,000,000 acres of wheat will be planted this fall. From 2010 until 2012 in the United States, wheat prices have increased by 42 percent and use for livestock feed has increased an astounding 238 percent. In grain deficit Southeastern states wheat growers are rapidly cutting into the shortfall of grain for use as livestock feed. During the same time, U.S. wheat exports were down by 11 percent and food and seed use was up 3 percent. The small increase in food and seed use was driven primarily by an increase in demand for wheat seed. Wheat acreage for the 2012-2013 growing season in the Southeast is likely to be driven by continued high prices. The latest USDA estimates are for continued good wheat prices, likely in the $8-$9 per bushel range.
Uncertainties over the U.S. corn crop in 2012 are dominating world markets. The U.S. corn yields declined for the third year in a row in 2012. In June of 2012, the USDA estimated corn yields would be 163 bushels per acre. Following one of the worst droughts in history in the Midwest that yield estimate is now down to 122 bushels per acre. Small yield increases in corn in most Southeastern states had little impact on total corn production in the U.S. Production declines over the past three years have driven domestic use for corn down from 13 billion bushels in 2010 down to an estimated 11 billion bushels in 2012. Use is projected to continue to decline in 2013. In 2012 corn stocks were at their lowest levels since 1995. In the past year corn used for ethanol in the U.S. is down 25 percent, feed use is down 9 percent and corn exports are down 25 percent. During that same time, corn prices have increased by 26 percent.
Whether soybean acreage in the Southeast is being driven by wheat or vice versa is open for debate. Regardless, soybean acreage across the region was up in 2012 and appears certain to be up again for the 2013 planting season.
North Carolina a measuring stick
Again, using North Carolina as a measuring stick, soybean acreage in North Carolina in 2012 is projected to be more than 1.43 million acres. For the 2013 season, acreage is expected to increase to more than 1.5 million acres. Extremely hot weather during part of the growing season in 2012, combined with the ideal moisture across most of the state, is proving to be a trade-off on yield, which will likely end up somewhere in the 30 bushel per acre range. The soybean market is riding on a smaller South American crop and on U.S. production concerns for the drought stricken 2012 crop. Since 2006 world soybean stocks are down 12 percent. More alarmingly, exports from major soybean exporters like Argentina, Brazil, Paraguay and the U.S. are down an average of 35 percent. Most economists agree this continued decline in soybean stocks worldwide should mean extended good prices. Brazil and Argentina had a sharp increase (29 million metric tons) in soybean production in 2012 and U.S. production is expected to have a slight decrease. Worldwide, soybean production is expected to increase by 11 percent for the 2012 production season, but demand will more than offset a one-year increase. In the United States strong demand will absorb the smaller than expected crop, pushing stocks lower and domestic demand higher. Whether the price of 2012 beans goes up or down will be driven by purchases made in South America and China. Declining soybean stocks will push soybean meal prices even higher. Soy meal prices already are already up 45 percent over the past two years.These high prices are already impacting livestock production in the Southeast and will continue to do so into the next year.
While high grain prices have been a boon for some farmers, the corresponding high price for livestock feed has been devastating for many. Beef cattle numbers are at their lowest level since 1952 and production is near historic lows (22.5 billion pounds). The economic news is not all bad for livestock producers, at least for those able to stay in the business. Beef prices over the past two years have risen by 53 percent and hog prices are up by 65 percent. Despite the high prices, production is expected to fall 45 percent and pork and poultry production by 1-2 percent in 2013.
Source: Southeastfarmpress.com, 12.7.12