A Newsletter for Extension Staff
Livestock Marketing Information Center
State Extension Services in Cooperation with the USDA
Market Indicators . . . March 24, 2017
Trends…LIVESTOCK SECTORS BENEFIT FROM STABLE CORN PRICES
So far this quarter, the corn market has been reflecting the effects of last fall’s huge harvest matched up with good overseas buying interest and accelerating usage from the US corn ethanol industry. The 15.1 billion bushel corn harvest of 2016, an 11.3% increase from the prior year kept corn prices on the defensive during the last half of last year. Using Omaha corn prices as a proxy for Western Corn Belt corn values, price bottomed out last August at an average monthly price of $2.98 per bushel. Over the course of the next four months, corn prices were able to move up 10 cents. Since November, Omaha corn prices have added on another 30 cents. By comparison, Omaha corn prices between November 2015 and February 2016 went down 8 cents per bushel.
The potential for corn prices to sustain the uptick compared to the lows that began last fall will depend on exports and domestic industrial use posting gains relative to the spring and summer of 2016. The USDA’s World Agriculture Supply and Demand Estimates (WASDE) for the corn market, that was released a couple weeks ago, implies that usage gains in the second half of the year will not be as big as the first six months following last fall’s harvest. In fact, corn export projections for the last six months of the crop year come up short of a year earlier by about 100 million bushels (5%-10% less). Corn used domestically for food and industrial products is forecast to maintain an increase in the next six months similar to the increase that has been registered in the first half of the year. Last spring, Omaha corn prices moved up 20 cents per bushel from the winter quarter. If usage gains decelerate in April, May and June, prices may struggle to increase by more than 10-15 cents per bushel on a quarterly average basis.
During the last two weeks, Omaha corn prices have declined 25 cents, into the $3.15-$3.20 per bushel range, compared to the January and February monthly average of $3.39. Assuming a winter quarter average corn price at Omaha of $3.35, the prospects for an average Omaha corn price for the spring quarter may be close to $3.50. This compares with a spring quarter 2016 Omaha corn price of $3.66. Translated into nearby corn futures market terms, a $3.80 price would be consistent with seasonal basis relationships between the Omaha market and nearby futures.
The confirmed detection of Highly Pathogenic Avian Influenza (HPAI) in a Tennessee meat-type (broiler) chicken breeder flock on March 4 prompted immediate efforts to depopulate that flock and limit transportation of poultry in and out of the area. The location of the outbreak, Lincoln County, Tennessee, adjoins Alabama, which has also raised its precautionary efforts to prevent a significant disease outbreak. Since the initial HPAI outbreak, there have been five other detections of HPAI in the Alabama-Tennessee area, of which one was a backyard flock and one was at a flea market. The number of birds destroyed from the commercial flocks totaled less than 200,000 and does not have a significant impact on supplies of poultry in the US.
January broiler production was up 7% from a year earlier, boosted by one additional processing day versus January 2016. On a per-day basis January slaughter was up 2%, in line with hatchery output in late 2016. Average bird weights at time of processing were only up by a fraction of a percent from a year ago, as industry efforts to reign in problems associated with breast muscle texture (“woody” breasts) result in lighter bird processing weights. February chicken production will be down from last year due to the “Leap Year” effect of one less day this year. Chicken production for the current quarter is expected rise 1-2% year-over-year; and for the entire year to increase by 2-3%.
U.S. BEEF SECTOR NET TRADE VALUE IMPROVED
After a very difficult 2015, on a dollar basis the U.S. beef industry returned to being a net exporter in 2016. Here we summarize trade across the industry which includes more than just beef, those non-meat items include: variety meats; tallows and greases; hides; and live animals.
In terms of U.S. exports, the largest value contributor (69% of total sector sales in 2016) was beef and veal. Value wise, beef and veal exports were essentially unchanged from 2015’s level. It is critical to note that U.S. beef tonnage exported during 2016 increased 13% year-over-year, but the prices at which sales were made were below 2015’s. The next largest contributors to export value were hides and skins (14% total value), then variety meats (13%). Total sector exports were $7.85 billion, down 1.6% ($132 million) from 2015’s.
On the import side, the year-over-year change was dramatic as both tonnage and prices were lower. Beef sector imports by the U.S. fell by over $2.03 billion in 2016 from a year earlier. That decline was led by a drop in the value of beef and veal imports of $1.43 billion compared to 2015’s. In 2016, the value of cattle imported by the U.S. declined by $582 million year-over-year. The two largest categories of imports are beef and veal (71% of total beef sector imported products) and live cattle (24%).
The difference between beef sector exports versus imports was positive in 2016, making the U.S. a net exporter on a value basis for the year. Net exports totaled $882 million, a dramatic change for the negative posted in 2015 (-$1.01 billion). Still, 2016 net exports remained well below the level recorded in the years from 2010 through 2014.