Every summer the agricultural sector anticipates the harvest and speculates on how much grain will be produced. Ac; time passes, more information is gathered about probable yields, harvested area, and production in the U.S. and the rest of the northern hemisphere. The information this year may be more critical because of the current high crop prices and low stockholding situation

Elmore, Steven L.

Meyers, William H.

Smith, Darnell B.

English

Every summer the agricultural sector anticipates the harvest and speculates on how much grain will be produced. Ac; time passes, more information is gathered about probable yields, harvested area, and production in the U.S. and the rest of the northern hemisphere. The information this year may be more critical because of the current high crop prices and low stockholding situation.</p

Elmore, Steven

Smith, Darnell

Meyers, William

Digital Repository @ Iowa State University (ISU)

Iowa Ag Review A Public-mion from the Cnuerfor Agricultuml tmd Ruml Dt•wlot'"'""'· Department of Economics, College of Agtiadnm· September 1996 What~ Inside? The Current Situation The Impact of 1996 Weather on Crop Markets ............................... , ....... , ........ 1 CARD/FAPRI Analyses The EU Export Tax: Impact on U.S. Markets .................................................. 5 Agriculture's Next Ten Years: I996 Iowa Baseline ....................................... 6 Would Revenue Insurance Have Paid During the 1993 Flood? ................................ 8 Special Articles Will Freedom to Farm Harm the Environment? ............................................. 10 Emerging Issues Iowa Farming: Evolving Risk and Risk Management .. .. .. .. .... .. . .. .. .. .. .. ......... ... .. 12 How Iowa Stacks up Under the 1996 Freedom to Farm Payments ........................ 14 Meet the Staff Chad Hart, U.S. Policy Specialist ................ 15 Recent CARD Publications ....................... 16 ISSN 1080-2193 http://www.econ.iastate.edu/card!agreview IOWA STATE UNIVERSITY OF SC I ENCE AND 1 EC HNOLOGY Quarterly Vol. 2, No.4 The Current Situation In Iowa The Impact of 1996 Weather on Crop Markets Steven L. Elmore, 5151294-6175 Darnell B. Smith, 515/294-1184 William H. Meyers, 5151294-1184 Every summer the agricultural sector anticipates the harvest and speculates on how much grain will be produced. Ac; time passes, more information is gathered about probable yields, harvested area, and production in the U.S. and the rest of the northern hemisphere. The information this year may be more critical because of the current high crop prices and low stockholding situation. To provide market information, USDA brings out monthly estimates of crop conditions, production , and use of major crops. These estimates change over time as more information is gathered and made available. For example, the july estimates showed com produc-tion in the U.S. at 9.1 billion bushels, but after survey-ing the major corn producing states, the estimates were revised downward to 8. 7 billion bushels in August, then were bumped up to 8.8 billion bushels in Septem-ber. FAPRl analyzed the new crop conditions reported by the USDA in july and a lower production scenario that market experts thought likely. FAPRI's lower produc-tion estimate of an 8.8 billion bushel crop of com turned out to be only 0.3 percent higher than USD&; September estimate. This production of grain crops and updated hog inventory numbers were used for the basis of a short term agricultural outlook update. This three year outlook provides infonnation of the impact on the early season wet weather on U.S. and Iowa agricultural markets. (continued, page 2) Iowa Ag Review Iowa Corn Price 5.00 ,-------------------., ~ 4.50 1----------,.,.. .... ------1 gj 4.00 1--------::lr=~---------l Ill ~ 3.50 1------...,...""'"- ------ -----1 ~ 3.00 e:::........::--------------=-~ ..! 2.50l=~~~~~~~-=~~~~~j. 0 0 2.00 1.50 .___.__..___.__ ..___.__..__---L.._.L..----L..-.L..--1 Jan Mar May Jul Sep Nov ----- 1994 ---+--- 1995 -------- 1996 Iowa Soybean Price Qj .l! 7.50 , _____ ....,.. ..... ~7""11--------l (I) cil 7.00 1---...--...,...,'-----------------l ~ 6.5o~::tll:::l!!l:~~~~~-------7"f ~ 6.00 1----------J-=~~,...--."----1 ,!!! I 0 5.50 1------,-=::=-41...-........ .___ --llk-- -=-----.1.. 0 ----- 1994 ---+--- 1995 -------- 1996 Iowa Alfalfa Hay Price 110 c:: 105 0 1- 100 .... 95 41 c. 90 f/l .... 85 .!!! 0 80 0 75 70 Jan Mar May Jul Sep Nov ----- 1994 ---+---1995 -------- 1996 Iowa Oat Price 2.60 ,....------------------, ~ 2.40 1--- ----:-7"" ....... :-------------j gj 2.20 1----.....,~----::::::l-====,.r------l Ill 2.00 ~-L--- -------------1 .... ~ 1.80 (I) 1.60 11!1"--l!t-::e=>~F•~~·::::;;~•~~"!'I ..! 1.40 ........ ~e=-~-==-----=---~~..;:-_:____::!IL_....:,_---=:-:::;·~ 0 0 1.20 1.00 '---'-----'---'-----L--'----.L..--'--'---'---' Jan Mar May Jul Sep Nov -----1994 ---+--- 1995 -------- 1996 U.S. Crops With low carry-over stocks, the 1996/97 corn and soybean markets are tight and susceptible to additional yield shocks. Barring an early frost, the U.S. will be facing a crop situation similar to the current scenario shown in Table l. The wheat estimates do not change as much as corn and soybeans because more informa-tion was known abom the winter wheat crop when the baseline was developed in early April. Nevertheless, estimated wheat prices for l996/97 increase by more than 10 percent. Com planted area and production are smaller than was earlier anticipated, due to the wet spring planting conditions. Corn production in the current scenario is 457 million bushels below baseline, making a tight situation even tighter. The reduced supply sharply increases the estimated farm level com price for 1996/ 97 from $2.75 per bushel to $3.21 per bushel. Exports and domestic use decrease in response to the higher prices. Responding to the higher prices, farmers are expected to plant 2 million more acres of com in 1997/ 98 and increase production by 343 million bushels over the baseline. Estimated soybean production for 1996/97 is slightly higher than the baseline, but supply is reduced due to lower carry over stocks this year. The soybean price is also driven higher by feed demand pressures in sympathy with corn prices. Table 1: Select Effects on United States U.S. Cor n 96/97 97198 98/99 Production (Million Bushels) Baseline 9,289 9,336 9,450 Current Scenario 8,832 9,679 9,381 Change -457 343 -69 Domestic Use Baseline 6,724 6,994 7,079 Current Scenario 6,550 7,078 7.087 Change -174 84 8 F xports Baseline 2,236 2,168 2,201 Current Scenario 2.089 2,130 2,174 Change -147 -38 -27 Far m Price (Dollars per Busllel) Baseline 2.75 2.46 2.31 Current Scenario 3.21 2.43 2.33 Change 0.46 -0.03 0.02 Page 2 CENTER FOR AGRiCULTURAL AND RURAL DEVELOPMENT September 1996 Table 1: Select Effects on United States Crops (continued) Production Baseline Current Scenario Change Domestic Use Baseline Current Scenario Change Ex-ports Baseline Current Scenario Change Farm Price Baseline Currem Scenario Change Production Baseline Current Scenario Change Domestic Use Baseline Currem Scenario Change Exports Baseline Current Scenario Change Farm Price Baseline Scenario Change U.S. U vestock U.S. Soybeans 96/97 97/98 98/99 (Million Bushels) 2,292 2,344 2,428 2,383 2,f96 2,695 91 152 267 1,465 1,507 1,556 1,467 1,494 1,567 2 -13 11 808 805 804 794 799 802 -14 -6 -2 (Dollars per Bushel) 6.50 6.26 5.74 7.31 6.57 5.66 0.81 0.31 -0.08 U.S. Wheat 96/97 97/98 98/99 (Million Bushels) 2,363 2,443 2,f39 2,263 2,469 2.516 -100 26 77 1,252 1,2-+8 -4 1,319 1,368 49 1,087 1,131 1,047 1,097 -40 -34 1.315 1,365 50 1,215 1,205 -10 (Dollars per Bushel) 3.78 3.37 3.43 4.25 3.55 3.40 0.47 0.18 -0.03 The U.S. livestock industry is affected by the high feedgrain prices. Pork production falls even though the industry is receiving higher barrow and gilt prices (Table 2). The relatively high feed prices more than offset the higher market prices for hogs. Production falls as hog invemories decline in response to high feed costs. Higher prices and lower supplies reduce domestic consumption and especially exports. The impact of the current scenario on beef is very small. The U.S. beef price appears to be at the bouom of the market cycle in 1996 instead of 1997, as in the baseline. Liquidation of some of the breeding herd due Iowa Ag Review Iowa Steer and Heifer Price 76 74 i 72 (,) 70 ... 68 Q) Q. 66 Ill 64 ... .!!! 62 0 0 60 58 56 Jan Mar May Jul Sep Nov ---1994 --+-1995 ---1996 Iowa Feeder Calf Price 100 'C 90 Ill Q) ::1: 80 ... 8. 70 Ill ... 60 .!l! 0 50 0 40 Jan Mar May Jul Sep Nov ---1994 --+- 1995 ---1996 Iowa Barrow and Gilt Price 65 i 60 (,) 55 ... 50 Gl Q. 45 Ill ... 40 .!!! 0 35 0 30 25 Jan Mar May Jul Sep Nov ---1994 --+-1995 ---1996 Iowa Sow Price 60 ~ 55 50 (,) 45 ... Q) Q. 40 Ill ... 35 .!!! 30 0 25 0 20 15 Jan Mar May Jul Sep Nov ----1994 --+-1995 -e-1996 September 1996 CENTER FOR AGRICULTURAL AND RURAL DEVELOPMENT Page 3 Iowa Ag Review Table 2: Select Effects on United States Livestock. U.S. Pork Production Baseline Current Scenario Change Use Baseline Current Scenario Change Barrow &: Gilt Price Baseline Current Scenario Change 1996 1997 1998 (Million Pounds) 18,051 18,949 19,092 17,229 17,207 17,745 -822 -1,742 -1,347 18,715 19,002 19,657 17,824 17,801 18,307 -891 -1,201 -1,350 (Dollars per CwL.) 46.00 47.70 45.13 51.91 53.24 49.30 5.91 5.54 4.17 U.S. Beef Production Baseline Current Scenario Change Use Baseline Current Scenario Change Nebraska Direct Steers Baseline CurrenL Scenar io Change 1996 1997 1998 (Million Pounds) 25,917 26,674 26,474 25,813 26,387 26,435 -104 -287 -39 28,038 27,914 -124 28,761 28,400 -361 28,613 28,509 -104 (Dollars per Cwt.) 63.82 62.18 68.35 63.37 63.98 65.67 -0.45 1.80 -2.68 to the high feed plices slightly reduces production for the remainder of the period. Prices pick up in 1997 but grow at a slightly slower rate thereafter. Iowa Impacts The short-run impact on Iowa due to this year's weather appears to be positive in the crop sector. Iowa fanners would have had gross market receipts of $11 .4 billion under the April baseline projection, which are now projected to be over $12.4 billion for 1996/97. The $1 billion increase in receipts is evenly divided between crops and livestock (Table 3). Low carry-over stocks and high prices due to solid demand have set the stage for either a good or a bad 1996 crop year depending on whether one is buying or selling the high priced crops. One thing that can be said about this situation, it is volatile. The lower production expectations due to the weather this year has had a measurable impact on the markets for the next three years. Even so, crop markets could receive another jolt this fall if there should be an early frost. + Table 3 : Select Effects on Iowa Agriculture. Crops Baseline Scenario Change Livestock Baseline Scenario Change Planted Area Baseline Scenario Change Production Baseline Scenario Change Farm Price Baseline Scenario Change Planted Area Baseline Scenario Change Production Baseline Scenario Change Farm Price Baseline Scenario Change Breeding Hogs Baseline Scenario Change Market Hogs Baseline Scenario Change Cash Receipts FY96/97 FY97/98 FY98/99 (Million Dollars) 5,856 5,688 5,457 6,348 6,134 5,486 493 446 28 5,513 5,402 5,170 6,063 6,106 6,008 549 704 838 Iowa Corn 96/97 97/98 98/99 (Thousand Acres) 12,500 12,888 12,808 12,700 12,585 12,803 200 -303 -5 (Million Bushels) 1,645 1,711 1,742 1,600 1,673 1,741 -45 -38 -1 (Dollars per Bushel) 2.71 2.43 2.43 3.17 2.40 2.41 0.45 -0.03 -0.02 Iowa Soybeans 96/97 97/98 98/99 (Thousand Acres) 9,400 9,480 9,844 9,500 9,579 9,753 100 99 -91 (Million Bushels) 409 412 436 425 417 432 16 5 -4 (Dollars per Bushel) 6.44 6.20 5.69 7.23 0.79 Iowa Hogs 1996 6.50 0.30 1997 5.62 -0.07 1998 (Thousand Head) 1,393 1,603 1.852 1,482 1,579 1,762 89 -24 -64 12,544 11,852 -692 12,687 11,924 -763 13,639 12,591 -1,049 Barrow &: Gilt Price (Dollars per Cwt.) Baseline Scenario Change 45.24 43.33 38.53 50.37 50.96 46.75 5.13 7.64 8.22 Page4 CENTER FOR AGRICULTURAL AND RURAL DEVELOPMENT September 1996 

The Impact of 1996 Weather on Crop Markets

https://dr.lib.iastate.edu/handle/20.500.12876/45264

The Impact of 1996 Weather on Crop Markets

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