The top two factors influencing crop markets in 2013 will be the weather and the potential for a rebound in demand, which diminished last year with drought-driven high prices, Dr. Chad Hart told growers at the American Farm Bureau Federation’s 94th Annual Meeting. Still, despite so many uncertainties, prices for corn and soybeans will remain historically high, according to Hart, associate professor and Extension economist at Iowa State University. .
“We’re not done feeling the effects of the weather system that’s hit us over the past couple of years," he says. Of the decline in corn demand, Hart says it had to happen. In addition, better-than-expected yields and the moderating of prices bode well for upping demand.
“While our yields are down, we had enough acreage in place across this country that, even in this drought, this was the eighth biggest corn crop we’ve ever produced. It is because we made up the yield loss with an acreage gain.”
Was it sufficient to cover most of our needs over this last year?
“We covered a fair amount. The idea is that demand had to pull back to match the short crop. But when you look, yah, we have a little left in stock. We saw feed demand back off a little bit. We saw ethanol demand back off a little bit. The market sector that gave up the most was exports. We’ve cut those pretty darn hard. We’re still balancing out supply and demand across the ag markets.”
Although the corn export market has been cut in half because of higher prices, growers are taking little notice with domestic feed needs driving much of the demand, according to Hart. High feed prices are having an effect in some livestock sectors, but what grain is being used domestically for feed will be exported as meat in 2013, he said.
“The outlook now for 2013 is that beef is going to pull back a little bit. Pork may actually grow in 2013. Broilers will pull back a little bit, but turkey is going to grow a little bit. So, meat production, on the whole, is holding up very well considering the high feed costs that we have had. We continue to market our crops through our livestock, through our meats. And, arguably on the meat side, our strength has been the international markets. Exports on the meat side continue to remain robust and, I’m going to argue, help support livestock as we look out 2013 into 2014. Hopefully we’ll see some profitable margins for our cattle, hog, and poultry producers as we move through 2013.”
Hart says the supply and demand rebalancing will have the effect of working its way down to competition for acres come planting time. He said the first effects are being seen in wheat country. More winter wheat was planted this year, but adverse weather has resulted in poor stands.
“One of the first questions out of the gate is: ‘How much does wheat lose possibly to corn and soybeans as we move into this spring?’”
He says corn appears to be leading the race at this point with a better relative price, soybeans are in second place, wheat is probably third and cotton comes in fourth.
“So as you look here, that competition in ’13 is shaping up a lot like the competition in ’12, where in ’12 we saw corn area go up four-and-a-half million acres. We saw soybean area go up by more than a million acres. And we saw wheat, depending on your type, some went up others went down. Cotton was the one that gave up two million acres last year. We’ll likely see something like that happen again in ’13.”
In spite the drought that damaged the corn and soybean crops heavily requiring producers to fall back on crop insurance, Hart says due to higher prices, the corn and soybean crops were the most valuable ever produced. In 2011, he says, net farm income nationwide set a new record and those gains could be extended.
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