Stockpiles of corn, soybeans and wheat are enormous. Cotton and rice are stuck in neutral. Those are just a few of the takeaways experts share as they look ahead to what the new year might bring. Although those realities might seem fairly grim, many say there are reasons to be optimistic, even if it’s unclear when or how prices will rally. For more in-depth commodity outlooks, visit agweb.com/2017-market-outlooks.
Soybeans Eye China Demand Vs. South America Supply: The U.S. soybean market will continue to feel the effects of China’s insatiable appetite, according to analysts and ag economists. Yet it could face headwinds from a strong U.S. dollar and a large South American crop.
“China’s robust buying pace continues to be on target for the growth rate we’ve seen developing in recent years, suggesting final demand just above 102 million metric tons (MMT), up about 1.5 MMT from USDA’s current estimate,” says Arlan Suderman, chief commodities economist at Intl FCStone.
As of December, USDA’s 2016/17 export forecast for soybeans totals 2.05 billion bushels. The increase in soybean demand is driven partly by the expansion of hog and poultry operations that use soymeal for feed.
Yet a strong U.S. dollar means the exports of other nations are cheaper.- By Debra Beachy
Can ‘King Corn’ Keep its Crown? The king of the crop world might lose ground thanks to weak prices and more appealing profits on alternative crops.
“We expect to see a drop in corn acreage and a jump in soybean acres in 2017,” says Pat Westhoff, director of the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri. “If you look at prices today, it says plant beans, don’t plant corn.”
Westhoff warns, however, that input prices might reduce the advantage of soybeans. “Corn looks better when fertilizer prices are lower,” he says. “It also gets more complicated when you look at futures. Corn prices look better in December 2017 than they do today.”
Prices could improve, but “if you look at the numbers we put out in August, we’re in the high $3.00 range, but we won’t get to $4.00 in the next couple years,” Westhoff says.- By Sonja Begemann
Hay Prices Rely on Basic Economics: Barring a spring weather catastrophe, analysts expect hay prices this year to remain steady. Big supplies and lower-than-average demand will put price pressure on hay, excluding premium alfalfa.
“We have an incredible amount of hay,” says Dan Undersander with the University of Wisconsin forage team. “We had an above-average carryover.”
According to western hay market expert Seth Hoyt of the Hoyt Report, there’s sufficient carryover in the West as well, with Idaho leading the pack.
The huge gap in price between supreme quality hay and low quality hay, a trend that really picked up steam in 2016, will likely continue.
“Quality hay has a good premium and that is likely to stay,” Undersander says. “There will be opportunity to bring some hay in from the West, but of course the farther you go, the higher the transportation costs.”
Hay exports to China have increased year over year but fell sharply in September. Hoyt credits the decline to the Chinese not being willing to pay exporters full price because of heavy shipments from June through August.- By Anna Lisa Laca
Has Sorghum Lost Its Momentum? It appears the pendulum has swung back the other way for sorghum. The crop enjoyed a large uptick in acres in 2016 to 8.5 million acres, up from 7.1 million acres the year before. Yet the latest USDA estimates indicate sorghum will lose that ground and more.
Projected 2016/17 acres will drop to 6.8 million, according to USDA. Some market fundamentals go far in explaining the reduction in acres, including higher stocks and lower prices. The 2016/17 estimated price range is $2.80 to $3.40 per bu., down from $3.31 a year ago and $4.03 two years ago.
Other factors present obstacles, too, says to John Holman, associate professor of cropping systems at the Western Kansas Agricultural Research Center.
“With the challenges we have had recently with sugarcane aphid and weeds in sorghum, and with China backing away from buying sorghum, we might see a slight shift to more dryland corn acres,” Holman says.
Other small grains could see small acreage gains. Barley acres could grow from 3 million to 3.6 million acres, while oats could increase from 2.8 million to 3.1 million acres, USDA says.- By Ben Potter
Cotton, Rice Stuck in Static Markets: Despite a tepid forecast, cotton growers won’t “spit the bit,” particularly with no safe haven crop in sight, but rice producers could see acres fall.
For the U.S. cotton industry, the echo of a 17% jump to 10 million acres in 2016 is fading fast. With prices perpetually caught in the doldrums, shifts between 65¢ to 75¢ make for a subprofitable cash price, the third year of inadequate or subsistence level pricing.
Farmers can expect December 2017 futures to trade between 63¢ and 75¢, says John Robinson, Texas A&M University Extension cotton economist.
For rice producers, price jumps to $10.30 cwt are becoming falls to $9.70 cwt, suggesting prices are in a cough-and-sputter cycle. Mid-South rice acres likely will fall by 15% to 20%, predicts Jarrod Hardke, rice Extension agronomist with the University of Arkansas System Division of Agriculture.- By Chris Bennett
Cattle Forecast Bleak, But With Some Opportunities: In two short years, cattle markets have flipped from record highs to depressing lows. Ranchers shipped semi-loads of calves to market this fall that were valued at $70,000 less than the same trailer loads in 2014.
“Profits plus grass equals expansion,” explains John Nalivka, president of Vale, Ore.-based Sterling Marketing. “Beef cow slaughter was down 14% in 2014 followed by a 4% drop in 2015. While sharply reducing herd culling in order to take advantage of higher prices, cattlemen also bred more heifers.”
Yet there are opportunities. Retained ownership might be attractive for cow-calf producers, depending on calf weaning weights and management flexibility, and the price roll-back on calves might offer stocker opportunities, says Derrell Peel, Oklahoma State University Extension economist.- By Greg Henderson
Milk Prices Set To Move Higher: Even though U.S. milk production surged 2.5% in October, shrinking production in other regions of the world and increasing global demand mean milk prices will likely improve in 2017, say University of Wisconsin dairy economists Bob Cropp and Mark Stephenson.
USDA projects about a $1 per cwt increase in the All-Milk Price in 2017. Cropp and Stephenson are even more optimistic: They project a $2 bump in prices.
“The average Class III for the year could be near $16.50, a good improvement over the expected $14.75 this year,” Cropp says. A $16.50 Class III suggests an All-Milk Price average of $18 or more.
Despite this optimism, there are several wild cards dairy farmers need to monitor in the year ahead, including lower milk output in the European Union and New Zealand, says Mary Keough Ledman, editor of the Daily Dairy Report.- By Jim Dickrell
Global Glut Pushes Down Wheat Prices: Analysts expect an even greater global wheat glut in 2017 to drive down prices and whittle away at acreage. Pushing down prices are three consecutive years of world wheat production and carryout. USDA estimates a third record global wheat harvest.
“Record high global supplies coupled with the idea of a record crop coming out of Australia will keep a lid on prices in the short-term,” predicts Angie Setzer, vice president of grain at Citizens Elevator in Charlotte, Mich. Analysts project producers under pressure from low prices will make the decision to plant less wheat for the second straight year.
Overall wheat acres could decrease by 7% to 10%, notes Arlan Suderman, chief commodities economist at Intl FCStone. One potential bright spot: USDA projects exports of 975 million bushels for 2016/17, 200 million more bushels than for 2015/16.- By Debra Beachy
Top Hog Market Movers: Pork producers have a long way to go before they’re consistently making money. The U.S. has a lot more pigs than it does slaughter capacity, and producers shouldn’t expect the trend to change this year. Prices have declined significantly more than cutout value, which reflects wholesale prices. There is a positive component to this scenario in the form of low retail prices on pork. That’s a primary driver of demand. “We do not have a demand problem at this point,” says Steve Meyer, vice president of pork analysis at EMI Analytics. “The economy is a little soft, and I’m concerned about that, but I think it is remarkable consumer attitudes have held up because they usually go down in an election year.”
The repeal of mandatory country-of-origin labeling (mCOOL), low U.S. pork prices and relisting of plants for export to China are encouraging. China is expected to import even more product in 2017.- By JoAnn Alumbaugh