Supply and Demand Influence Corn Prices, Livestock Prices 

Dan Childs of The Samuel Roberts Noble Foundation offers a primer on factors influencing the price of corn and, secondarily, livestock:

In a free market economy, price is ultimately determined by the supply and demand for a product or commodity. Short-term price gyrations often occur and can be influenced by market reactions to news concerning such things as weather, government reports and/or policy. Corn is a commodity that reflects this scenario

Profitability in the cattle industry is heavily influenced by the price of corn. Corn, fed whole or further processed, is used as an energy supplement in growing rations and as a main ingredient in the diet of cattle being finished for slaughter. In addition, the byproducts produced from corn processed for food and fuel, such as corn germ, hominy feed, corn gluten feed and distillers grain, are used extensively in cattle rations. Having an understanding of corn market dynamics can be useful in helping cattle owners manage the price of feed, one of the major costs of production.

The price of corn is largely determined by supply and demand. On the supply side, there are basically three sources of U.S. corn. The first source comes from leftover stocks from the previous year. This usually provides between 1 and 2 billion bushels, although the 2013 number will likely be roughly 750 million bushels due to the reduced 2012 crop.

The second and largest contributor to supply is current domestic production. In the last 10 years, the nation's corn crop has varied from 10 to 14 billion bushels. Weather plays an important role in crop production. This is especially true in regard to planting and harvest dates, both of which impact the total size of the crop. The United States Department of Agriculture (USDA) publishes several crop reports each year: a late March report on acres expected to be planted; weekly crop progress reports from April through November; and estimated ending stock reports in January, March, June and September. These reports often cause wide price swings as the market interprets the numbers.

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A Five Million Acre Week- Wheat Harvest Makes Remarkable Progress in Latest Seven Day Period  

The 2013 wheat harvest remains behind a year ago and the five year average- but with the wheat crop dead ripe- and with perfect harvest weather- it was all hands on deck, every combine was called to duty and the custom harvesters and individual farmers harvesting their own fields worked LONG hours between June 23rd and this past Sunday- June 30th.  The results- over five million acres of wheat were harvested in Oklahoma and Kansas in one seven day period.  WOW!!!! 

Oklahoma experienced summer heat last week with a high of 111 at Freedom on Thursday and heat indices reaching over 100 degrees across the state.  Oklahoma Wheat harvest was 84 percent complete by Sunday, ten points behind the five-year average. Virtually all canola was harvested by the end of the week.  (Click here to read the full Oklahoma Crop Weather report.)

In Kansas the winter wheat crop was turning color on 98 percent of the acreage, behind 100 percent a year ago and an average of 100 percent. Eighty-five percent of the crop was ripe, behind 100 last year and a 92 average. The Kansas crop was 57 percent harvested, well behind last year's 99 percent and the five year average of 67 percent. Condition was rated at 25 percent very poor, 18 poor, 24 fair, 25 good, and eight percent excellent.  (You'll find the full Kansas report by clicking here.)

Small grain harvest continued across Texas last week.  While some producers continued to graze cattle on previously-damaged wheat acres, others plowed fields and prepared for fall crops.  Seventy-three percent of the Texas wheat crop was harvested by the end of the week compared with 96 percent one year ago and a five-year average of 83 percent.  (Click here for the full Texas Crop Progress Report.)

Mild Start to July- Will It Turn Hot and Dry? We Ask Gary McManus (and we also ask him when we get that next great general rain)

Associate State Climatologist Gary McManus says the unseasonably cool temperatures experienced across the state as the month of July beings will persist for at least a few more days. I talked with Gary on Monday morning about his outlook for July and more.

McManus said a dome of high pressure over the desert Southwest has allowed a trough of low pressure to become almost stationary across the middle of the country. This trough funnels cooler temperatures into Oklahoma from the northwest. He said this pattern doesn't offer the possibility of much rain, but the lower temperatures and lighter winds put less pressure on soil moisture.


This also eases the move towards drought which is usually the case this time of year. McManus said that the eastern Panhandle has received more rain than normal--and certainly more than in the last few years--during the month of June, with Slapout receiving more than five inches.

On a broader scale- we jumped in with both feet with a discussion about La Nina versus El Nino.  McManus says that we may soon be getting some fresh direction when it comes to those Pacific Ocean temperatures that can greatly influence our weather- altho for now, the indicators continue to point to neither La Nina nor El Nino for the next few months.

Click here to read more as well as for a chance to hear our full conversation with Gary about all things weather as we begin this holiday interrupted week.

Derrell Peel Takes a Look at 2013 Cattle Markets at Mid-Year

Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist writes in the latest Cow-Calf Newsletter:

With the first half of the year behind us, it is useful to take a look at what has happened and the prospects for the second half of 2013. Beef demand has been and remains a crucial question, perhaps even more so in the second half of the year. Currently, Choice boxed beef prices are roughly $197/cwt., about one dollar above prices at this time last year. The difference is that Choice boxed beef prices at this time last year had just made a second unsuccessful attempt to break the $200/cwt. level while Choice values this year were above $200/cwt for 6 weeks in May and June. In addition, Select boxed beef prices are currently about $7/cwt. higher than the same time last year meaning that overall carcass values are significantly higher than a year ago. Boxed beef prices are expected to move higher by the fourth quarter due to declining beef production.

Beef production so far this year is down just under one percent, a smaller decrease than previously expected. Larger-than-expected beef cow slaughter since mid-March has contributed to the smaller than projected slaughter and beef production decreases. The most recent weekly slaughter data show that beef cow slaughter dropped below year ago levels for the first time in 13 weeks. While net beef herd liquidation this year seems likely given what has happened already, beef cow slaughter is expected to decrease year over year for the remainder of the year as long as drought conditions do not redevelop significantly. 

Click here to read more of Derrell's analysis.

 

Plan a July 4th Picnic for Less Than $6 per Person

A Fourth of July picnic of Americans' favorite foods including hot dogs, cheeseburgers, pork spare ribs, potato salad, baked beans, lemonade and chocolate milk is affordable this summer at less than $6 per person, according to an informal survey conducted by the American Farm Bureau Federation. The average cost for a summer picnic for 10 is $57.20 or $5.72 per person according to AFBF.

"Although retail food prices have increased modestly over the past year or so, most Americans should be able to find summer picnic foods at close to the average prices found by our volunteer shoppers," said John Anderson, deputy chief economist at AFBF.

"For many of us, nothing says the Fourth of July more than firing up the grill to prepare a meal," Anderson said. "We're fortunate here in America to have a consistent, high-quality supply of meats and poultry that can be grilled or prepared any number of different ways." 

(Click here to read more.)

 

Animal Welfare Groups Plan Suit in Response to USDA Decision to Allow Horse Slaughter

The following is from a news release distributed by the Humane Society of the United States and Front Range Equine Rescue:

The U.S. Department of Agriculture has given the green light for the grisly practice of horse slaughter to resume on U.S. soil. The agency approved an application for horse slaughter inspections under federal law at a plant in New Mexico. This news comes on the heels of the U.S. House and Senate appropriations committees' votes to halt all funding for horse slaughter in FY 2014. The decision means that the federal government could potentially spend millions of taxpayer dollars to start up inspections at horse slaughter plants, only to have Congress terminate the process in the coming months.

In response to the USDA's decision, The Humane Society of the United States and Front Range Equine Rescue plan to file suit immediately against the USDA to put a stop to this agency decision. The two groups previously informed USDA that they would take aggressive legal action against the agency, in light of the serious unresolved environmental and food safety issues surrounding horse slaughter.

Jonathan Lovvorn, senior vice president and chief counsel for animal protection litigation at The HSUS, said: "The USDA's decision to start up domestic horse slaughter, while at the same time asking Congress to defund it, is bizarre and unwarranted. Slaughter plants have a history of polluting their communities and producing horsemeat that is tainted with a dangerous cocktail of banned drugs. We intend to hold the Obama administration accountable in federal court for this inhumane, wasteful and illegal decision."

Click here to read more.

 

Cattle Producers Keep Pushing for Full Repeal of Death Tax

A pair of bills was introduced earlier this month in the US Congress that would fully repeal the Estate Tax at the Federal level, going a step further than legislation that was put into place at the very beginning of 2013. Companion bills in the House and the Senate, both named the Death Tax Repeal Act of 2013, were introduced in Congress by Sen. John Thune (R-S.D.) and Rep. Kevin Brady (R-Texas).

At the end of 2012, Congress passed the American Taxpayer Relief Act (ATRA) narrowly avoiding a return to a $1 million estate tax exemption with a 55 percent tax rate. ATRA permanently extended the estate tax exemption level at $5 million per individual ($10 million per couple) and raised the top tax rate to 40 percent. ATRA also maintained the spousal transfer, step-up in basis and indexes the estate tax for inflation.

One of the groups within the ag community that has fought hard for repeal, the National Cattlemen's Beef Association, was pleased when ATRA was signed into law. While NCBA continues to support the full and permanent repeal of the death tax, for the time being the permanent relief of ATRA is significant. Permanency in the tax code provides less uncertainty for estate planning.

Ken Bacus of the NCBA is my guest on the latest Beef Buzz.  He talks about the death tax. You can read more of this story and listen to Ken by clicking here.