U.S. Ag Report’s Tyne Morgan checked in with Don Close, Chief Research and Analytics, Terrain Ag, and Matt Bennett, AgMarket.net, recently to discuss planting delays and how those rains may also affect cattle producers.
With rain helping pasture conditions, Morgan wondered if it would change the outlook for rebuilding the cowherd.
“I think it’s absolutely the first step that we have to go into before we can start recovering,” Close said. “I also think there’s a secondary factor there besides a lot of these producers, simply not having the grass conditions to think about expanding. We’ve also seen a situation that the balance sheet for a lot of these guys who have told us look, ‘we’re going to continue to sell our calves to restore the balance sheet before we leap into expanding.’ So I think this is a step by step process. Clearly, the rain we’ve had over the month of these grass areas is hugely supportive for the long-term play.”
Looking at where the rain has fallen lately, Morgan points out it’s been the haves and have nots. The western plains, and specifically some of those wheat production areas expects rain in the coming weeks that could cause flooding. In other areas, like central and southwest Kansas, southeast Colorado, the conditions remain really dry.
These dry conditions play into the market according to Bennett.
“We’ve definitely seen, for instance, KC wheat gain on Chicago,” he said. “I think it makes sense due to some of the weather concerns and the western plains. Of course, soft red crop looks really good. So that kind of price action makes sense to me. I think one thing to watch right now and moving forward is how dry it’s been in the area.”
The panhandle of Texas, Oklahoma, and southwestern Kansas can have a situation spread with different conditions, Bennett added.
“I know a lot of folks have forecasted that this could be a very dry summer in the western plains and western Corn Belt,” he said. “I think it’s something to keep an eye on moving forward. I hope that this continued rain happens, especially to help build pastures. But I don’t think that we’re out of the woods necessarily just yet, as far as drought talk is concerned, on a grand scale.”
Switching gears from supply to demand, Close said the demand story for all species has been solid.
“Leading the pack on the gains that beef has had over the other species continues to hold,” he said. “At the very same time as we’ve gone through this series of earnings reports. We’re seeing a slowdown.”
Close points out slower earnings from companies like Starbucks and quick serve restaurants suggests consumers are feeling the inflationary pressure.
“Today, we’re still good, but it is something we have to pay attention to” Close added.
As farmers continue planting, demand for greens continues.
“We’re still running ahead on corn sales as a good sign as far as exports are concerned,” Bennett said. “A lot will be determined by what size the crop is out of Brazil, which seems to be in decent shape for the time being.
“As far as ethanol goes, we kind of slowed down a little bit on this spring shutdown that some people go through as far as maintenance is concerned,” he added.
“I’ve got to think these ethanol numbers will be strong moving forward,” Bennett said. “I can see the USDA happened to bump up demand again, as we move closer to harvest time. Whether we get a 50-million-bushel bump overall, I think that it’s certainly a possibility. I don’t know that you get much more than that just yet. But the bottom line, anything we can do to chip into this carry out certainly would help.”
