MARKETS
THE WESTERN PRODUCER | WWW.PRODUCER.COM | JANUARY 10, 2013
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U.S. WEATHER | SPRING OUTLOOK
Pray for snow, say U.S. corn belt crop experts Low yields predicted | Warm, dry weather raises fear CHICAGO, Ill. (Reuters) — The U.S. corn belt is seeing a dry winter after the worst summer drought in half a century. The development is reducing prospects for a bumper summer harvest that would help ease global food prices, say crop and climate experts. “We are still concerned about getting the leftovers out of the way from the drought of 2012. At this time we would not anticipate a national corn yield above the trend,” said Iowa State University climatologist Elwynn Taylor, who has studied crop production for decades. “Rather, we would expect a fourth consecutive year of below-trend crop, not as far below as in 2012 but still not up to par.” The 2012 drought locked twothirds of the U.S. continental land mass in severe drought last summer, cutting production of the biggest crop, corn, by 27 percent from early season estimates. The United States supplies more than half of world exports of corn, which is the top livestock feed for meat and dairy animals, the main feedstock for ethanol production and the leading ingredient in dozens of food and industrial products from vegetable oil to sweeteners, paints and plastics. As such, its price is a key for food inflation and its supply outlook is closely watched by Federal Reserve policymakers, bankers, farm suppliers and food processors. The government’s weekly U.S. Drought Monitor said last week that 42.05 percent of the continental U.S. remained in severe to exceptional drought, down from 42.45 percent the previous week. Parts of the corn belt east of the Mississippi River and parts of the central Plains received snow last week, providing much-needed moisture. However, little improvement is expected over the winter, according to the report. Taylor and other crop specialists said continued lack of snow and rain was the biggest threat in the western corn belt : Minnesota and South
Dakota south to Iowa, Nebraska, Missouri and Kansas. Those states produce half the U.S. crop. Taylor said in December it would take 40 centimetres of precipitation by April 1 to recharge moisture in corn belt soil, up from the usual 30 cm that farmers look for. The moisture is vital to spur adequate corn, soybean and spring wheat plant roots, which extend down to tap into subsoil moisture. Persistent drought over more than a year in many areas meant plant roots drove down two and a half to three metres last year in search of moisture, compared with the usual two metres. “Most agricultural soils hold about two inches (five cm) of water available to crops per foot (30 cm) of soil,” Taylor said. “With most of the moisture gone, that means it will take 16 inches (40 cm) of water soaking into the soil and in some places 18 (45 cm) to fully replenish it.” Jim Angel, state climatologist in Illinois, said the state’s conditions had improved slightly but have a long way to go before spring. Some areas of Illinois would need about 50 cm of precipitation to catch up. “The 2012 drought is not over yet. There are several areas of the state that are eight to 12 inches (20 to 30 cm) below normal in rainfall, some places even more,” Angel said. “In wintertime it’s tough because we don’t get that much precipitation. It’s a long shot at this point.” Illinois saw its second hottest year on record in 2012, averaging 13 C, and the 10th driest. The state’s subsoil moisture is still rated 67 percent short to very short, according to the Illinois crop update issued last week. Nebraska, the third largest corn producing state, has 77 percent of the state remaining in exceptional drought, according to the latest Drought Monitor. “ The concern is we just went through a 14 to 15 month stretch of incredibly dry weather in most locations in the state, excluding the southeast corner,” said Al Dutcher,
The U.S. central and southern Plains from South Dakota down to northern Texas are in severe to extreme drought, threatening the hard red winter wheat crop. The drought extends into the corn and soybean growing regions in the Midwest. If precipitation does not pick up soon, yields of those major crops will also suffer in the coming season.
The 2012 drought is not over yet. There are several areas of the state that are eight to 12 inches (20 to 30 cm) below normal in rainfall, some places even more. JIM ANGEL CLIMATOLOGIST
state climatologist for Nebraska. “For the vast majority of locations outside that area, we were looking at 40 to 50 percent of annual precipitation that fell in 2012, and that does not include the exceptionally dry fall of 2011.” Dutcher said central Nebraska needs 300 percent of normal precipitation to eliminate the soil moisture deficits over the next three months, while northeastern and western Nebraska need 500 to 700 percent of normal precipitation this winter. “One key issue for us, since we are
not getting a massive amount of moisture, is to keep a protective snow layer across the northern and central Plains so we don’t break dormancy as early as it did last year,” Dutcher said. “Last year we were putting leaves on trees in early March; typically that doesn’t happen until early April. That additional month of water use compounded the problem with the drought as we got into mid-summer.” Scientists are hoping they will have a better indication by early February of the seasonal weather pattern, which depends on whether conditions turn to an El Nino or La Nina. El Nino, a warming of Pacific waters, often leads to wetter weather in the U.S. Midwest. La Nina, a cooling of the waters, can have the opposite effect. Climate experts say the El Nino-La Nina outlook is “neutral” based on data from the National Weather Service and other government forecasts. “We do not have any clear signal that’s telling us whether it could be wetter or drier or near normal pre-
cipitation. That’s the same for temperature,” said John Eise, climate services program manager for the National Weather Service. Taylor said a return of La Nina, which the U.S. experienced in 2012, could be devastating: a return of abnormally high temperatures and diminished rain. “We can be concerned with this dryness, but we could have the same setup as 2001, 2003, 2007 that followed major drought years in western Nebraska where it turned exceptionally wet in the spring, reduced irrigation demands,” Dutcher said. “We still carried a high hydrological drought, but agriculturally we were at yield trend or above trend.” However, the worries remain for the moment. Freezing temperatures hitting much of the Midwest this week will prevent any moisture from permeating the soil. “Even if we got normal precipitation through the winter,that would not necessarily take care of the drought west of the Mississippi River. It’s pretty tough now,” Eise said.
BISON STEADY
were reported.
The Canadian Bison Association said grade A bulls sold at $3.85 per pound hot hanging weight and heifers sold at $3.75. There were discounts for those older than 30 months and carcasses outside buyer specifications. No slaughter cow or bull sales
LAMBS WEAKER
WP LIVESTOCK REPORT CATTLE FUTURES Chicago live cattle futures surged three percent last week, posting record highs on three consecutive days. The outlook for tighter supplies ahead supported the market. The record-setting feat was helped by February replacing the December contract as the spot month on Dec. 31, after having built up a significant premium. Futures were also boosted by an increase in wholesale beef values. The wide spread between the U.S. cash market and the Febr uar y futures indicates that cash values should rise. The weak cash-tofutures basis will encourage feedlots to hold back cattle. U.S. retailers were not featuring beef in early January, which isn’t surprising considering chicken and pork are much cheaper. Packers will
face a stiff challenge to push beef prices higher to keep pace with expected higher cattle prices and yet not kill beef demand. Futures might be forced down if they aren’t successful. Much will depend on whether the U.S. economy continues to grow and unemployment continues to fall.
$61.50 US per hundredweight Jan. 4, steady with the previous week. The estimated pork carcass cutout was $83.46, up from $81.32 the previous week. Weekly slaughter to Jan. 5 was estimated at 1.65 million, up from 1.425 million the previous week and down from 1.725 million in the same week the previous year.
Ontario Stockyards Inc. reported that 1,006 sheep and lambs and 63 goats traded Dec. 27. Light lambs sold lower and heavy lambs and goats were steady. Sheep sold at stronger prices.
CANFAX REPORT HOGS STEADY Supply and demand in the U.S. cash market was about even and hog prices were mostly steady in the first week of the new year. Cooler weather was slowing hog growth and causing transportation problems. Iowa-southern Minnesota hogs delivered to packing plants traded at
Holidays and thin cattle trade resulted in no prices or grading information being available for this Canfax report. Auctions were closed most of the week, and feedlots were not motivated to sell cattle with bids about $1 per hundredweight lower than the previous week. The Canfax fed steer and heifer prices for the last week of December
were $119.03 and $118.11 per cwt., respectively. Weekly fed cattle exports to Dec. 27 were 17,066. Exports were 803,682 year to date, up 18 percent over last year at the same time. The Canadian AAA cut-out value to Dec. 28 was $177.90, up from $172.77 the previous week. AA cutouts were $168.34, up from $167.17 .
A full Canfax report will be available next week. This cattle market information is selected from the weekly report from Canfax, a division of the Canadian Cattlemen’s Association. More market information, analysis and statistics are available by becoming a Canfax subscriber by calling 403275-5110 or at www.canfax.ca.