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CoBank: Grain Inventories and New Crop Outlook Boost Livestock Prospects

April 12, 2013

A decline in livestock margins has been offset to a degree by rising animal protein prices and growing exports.

Despite record high feed costs during the 2012/13 crop year, feed use in the animal protein sector has slipped by only 2% as U.S. farmers and ranchers limited the downsizing of their herds, according to CoBank.

A decline in margins has been offset to a degree by rising animal protein prices and growing exports, especially to Asia.

According to CoBank's newly released Quarterly Rural Economic Review, the smallest cattle inventory since 1952 has created market growth opportunities for the poultry and pork sectors, which have avoided liquidations of their herd or broiler flocks. The report notes that both the animal protein and dairy sectors will be closely monitoring prospective global grain harvests which, should they fail to reach their full potential, could require significant realignment in market strategies.

In the report titled, "Subpar Economic Growth, Drought Relief, and Upbeat Crop Prospects," CoBank notes that the grain and oilseed markets have reacted with renewed optimism to improvements in U.S. drought conditions during the past month. Still, timely rains and favorable planting conditions will be needed for the 2013/14 crops to reach their full potential and weather will continue to play an important role as the winter wheat crop develops and field work begins in preparation for corn and soybean planting.

The USDA's eagerly anticipated March 28 stocks report was decidedly bearish, with its estimates exceeding the average trade estimates for corn, soybeans, and wheat. Still, stocks relative to use for the old-crop marketing year are expected to fall to their lowest levels since 1995/96 for corn, and to 1964/65 levels for soybeans.

The USDA's March survey of planting intentions reported that 231 million acres will be sown to corn, soybeans, and wheat this spring, a slight gain over last-year's record high. However, total planted acreage nationwide will be slightly below what it was last year, and continuing drought conditions in some areas have produced a heightened level of uncertainty. As a result, agricultural markets will vacillate between the reality of current low stocks and expectations of abundant future supplies and price expectations for the new crop year will remain unusually wide ranging.

Issued by CoBank's Knowledge Exchange division, the Quarterly Rural Economic Review provides valuable perspective on market conditions in the industries served by the bank. CoBank regularly invests in research and knowledge-sharing programs in order to offer greater service and value to its customers.

CoBank is a $92 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving farmers, ranchers and other rural borrowers in 23 states around the country.

CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture and the nation's rural economy. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore. For more information about CoBank, visit the bank's web site.

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