Feeds, Price and Vola0lity Growing Michigan Agriculture Conference Lansing Center, Lansing, MI Jim Hilker Agricultural, Food, and Resource Economics Department Michigan State University January 24, 2013
Feeds, Price and Vola0lity Problem: Low and risky returns to livestock producers despite relaively high, but volaile livestock prices. Low Returns Largely Stems From: High and volaile feed prices. High and Vola0le Prices caused by: Tight projected stocks/ending stocks. Causes both high prices and volaility. Even small coninuously changing Supply and Demand condiions are more pronounced. Accented by: Short supplies of all/most subsitutes naionally, local condiions may differ marginally.
Feeds, Price and Vola0lity How long will this last? UnIl ending stocks are more pleniful. When could that happen? Could begin mid- summer and be in place by next fall. Does it have to happen this fall? No To happen late this year: Large feed crops in the U.S. and Rest of the World. Otherwise: Two normal years. Could it get worse? Yes When? This spring
WORLD CORN ENDING STOCKS Crop Year Mil. MT 200 150 100 50 0 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 South Africa China Brazil Argentina US all other Livestock Marketing Information Center Data Source: USDA-FAS 01/11/13
Monthly Corn Futures
U S HAY STOCKS AND PRODUCTION Crop Year Mil. Tons 120 100 December 1 Hay Stocks 80 Alfalfa Hay Production 60 Other Hay Production 40 2008 2010 2012 Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Forecasts by LMIC 01/11/13
U S ALL HAY STOCKS December 1 Mil. Tons 120 110 100 90 80 70 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Forecasts by LMIC G-NP-22 01/11/13
U S ALL HAY STOCKS May 1 (Beginning of Crop Year) Mil. Tons 30 25 20 15 10 5 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Forecasts by LMIC G-NP-21 01/11/13
ALFALFA HAY - MONTHLY AVERAGE PRICE Received by Farmers, U.S., Crop Year $ Per Ton 240 220 Avg. 06/07-11/12 200 180 2011/12 160 140 2012/13 120 MAY JUL SEP NOV JAN MAR Livestock Marketing Information Center G-P-12 12/31/12 Data Source: USDA-NASS
OTHER HAY - MONTHLY AVERAGE PRICE Received by Farmers, U.S., Crop Year $ Per Ton 150 145 140 135 130 125 Avg. 06/07-11/12 2011/12 120 115 110 2012/13 105 100 MAY JUL SEP NOV JAN MAR Livestock Marketing Information Center G-P-13 12/31/12 Data Source: USDA-NASS
ANNUAL AVERAGE CATTLE PRICES Southern Plains $ Per Cwt 175 155 135 115 95 75 500-600lb Steer Calves 700-800lb Feeder Steers Fed Steers 55 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC C-P-06 09/23/12
Feb Live CaXle Futures
Dollars 90 80 70 60 50 40 30 ANNUAL AVERAGE HOG PRICES National Slaughter Hog ($/cwt) 40 Lb Feeder Pig ($/Hd) 10-12 Lb Feeder Pig ($/Hd) 20 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Livestock Marketing Information Center Data Source: USDA-AMS 02/10/12
Feb Lean Hog Futures Prices
$ Per Head 275 225 175 125 75 25-25 -75-125 -175-225 -275-325 AVERAGE RETURNS TO CATTLE FEEDERS Feeding 725 Lb. Steers, S. Plains, Monthly Latest Data: December 2012 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Livestock Marketing Information Center Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC C-P-22 01/18/13
$/Head 60 IOWA MARKET HOG PROFIT Farrow/Finish, Monthly Latest Data: December 2102 40 20 0-20 -40-60 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Livestock Marketing Information Center 01/18/13 Data Source: Iowa State University
$ Per Cow 200 ESTIMATED AVERAGE COW CALF RETURNS Returns Over Cash Cost (Includes Pasture Rent), Annual 150 100 50 0-50 -100 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Livestock Marketing Information Center C-P-66 09/20/12 Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC
$ Per Cwt CHOICE STEER PRICE vs BREAKEVEN Cattle Feeding, S. Plains, Monthly 145 135 125 115 105 Latest Data: December 2012 Steer Price Breakeven 95 85 75 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Projected Breakeven Livestock Marketing Information Center Data Source: USDA-AMS & USDA-NASS, Compiled & Analysis by LMIC C-P-21 01/18/13
Feeds, Price and Vola0lity Michigan Corn: Michigan s projected 2012 corn yield was raised from 120 to 133 bu/acre in the January report. Shows the variability in supplies around the state. 2012 Michigan Corn ProducIon down 5% from last year, even with 2 years ago. Corn Acres were up 6% and 10%. Silage: 2012 Silage ProducIon was down 33% from 2010 and 2011. Silage acres were actually down this year, and we had lower yields. Abandoned acres were up. Hay: 2012 acres down 3% and yield down 33% relaive to 2010 and 2011 Baled Corn Stalks?
U S ANNUAL CORN ENDING STOCKS Crop Year Bil. Bushels 2.5 2.0 1.5 1.0 0.5 0.0 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Forecasts by LMIC G-NP-09 01/11/13
$ Per Bushel 8.00 NATIONAL AVERAGE CORN PRICE Crop Year, Received by Farmers 7.00 6.00 5.00 4.00 3.00 2.00 1.00 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Forecasts by LMIC G-NP-03 01/11/13
U S ALL HAY SUPPLY Crop Year Mil. Tons 190 180 170 160 150 140 130 120 110 100 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 May 1 Stocks Production Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Forecasts by LMIC G-NP-19 01/11/13
Feeds, Price and Vola0lity Probabili-es At this point the market is expec0ng a normal corn crop. July corn prices expected to be around $7.00 20% Chance of July Corn prices being $8.00 or higher: Probability means 2013 projected corn yield is expected to be 6-8 bu. below trend. 20% Chance July Corn prices being $6.00 or lower: Probability means 2013 projected corn yield is expected to be 4-6 bu. above trend.
Feeds, Price and Vola0lity Probabili-es At this point the market is expec0ng a normal corn crop. Harvest corn prices expected to be $5.20 20% Chance Harvest Corn prices being $7.00 or higher: Probability means 2013 corn yield was 6-8 bu. below trend. 20% Chance Harvest Corn prices being $4.40 or lower: Probability means 2013 corn yield was 4-6 bu. above trend.
Thanks QuesIons/Discussion Jim Hilker s Web Page http://www.msu.edu/user/hilker/
Dairy Feeds, Price and Vola0lity Growing Michigan Agriculture Conference Lansing Center, Lansing, MI Chris Wolf Agricultural, Food, and Resource Economics Department Michigan State University January 24, 2013
Nov 2012 Year- over- Year changes in milk producion
US Drought Monitor Jan 18, 2013 US hay crop 120 m tons in 2012 down 18% from 2006-2011 average Dec 1 hay stocks 76.5 m tons lowest since 1974
Milk Price Outlook Bearish factors DomesIc economic condiions High product prices Imports rising Strong producion in NZ Bullish factors ConInued high feed prices US more compeiive internaionally Lagging West/SW milk producion
Thanks QuesIons/Discussion
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