Last week’s release of the most recent World Agricultural Supply and Demand Estimates (WASDE) report was the first of the year to include predictions of the 2015 production rates. The upcoming year is expected to be one of decreasing beef production, but increased production of pork, chicken, corn and soybeans.
Beef production estimates for 2014 stayed a weak steady in May at 24.63 billion pounds (bp) compared to April’s expectations of 24.64 bp. For 2015, however, the predictions of reduced production is greater. At 24.39 bp, 2015’s production estimate is 248 million pounds (mp) below May’s projection of 2014’s beef production. This reduction stems from decreased placements, the actual and expected population of calves this year, the already small cattle inventory from which to build, and the still questionable nature of herd expansion.
Predictions of 2014’s ending stocks/2015’s beginning stocks of beef stood at 525 mp. This is well below 2014’s beginning stocks of 584 mp and 2013’s 608 mp. Similarly, per capita availability of beef is expected to decrease almost a pound in 2015 compared to 2014, from 54 pounds per person this year to 53.2 pounds per person next year.
A concerning detail for 2015 is that the USDA again predicts the U.S. will become a net importer of beef by volume, something that has been flirted with off and on in the past few years. While the beef trade estimates for 2014 still place the U.S. as a net exporter of beef—2.4 bp imported versus 2.51 bp exported—estimates for 2015 anticipate imports at 2.45 bp and exports at 2.43 bp. The report cites the reduced production estimates as the culprits for the increased imports and decreased exports.
But where there is shortage, there is money to be made by someone. The report’s first annual price projections for average 5-area live steer prices for 2015 stand at $145-157. By comparison, the report expects that range for 2014 to be $143-149.
Pork and chicken
Both pork and chicken production for 2015 are projected to increase. Compared to 2014’s estimated pork production of 22.67 bp, 2015’s projections are for 23.32 bp. Chicken production estimates for 2015, at 38.86 bp, is up 838 mp from 2014’s expected annual production.
The increase in pork production in 2015 is attributed to U.S. hog farmers “responding to [Porcine Epidemic Diarrhea virus]” with increased farrowings and feeding hogs for higher carcass weights. Increases in chicken production are credited to increased egg sets in response to low feed costs.
Trade in both competing proteins is projected to be mixed but mostly up in 2015. Imports of pork in the coming year is expected to be down 22 mp to 890 mp, while imports of chicken are expected to be up slightly to 116 mp. Exports for both competing meats are projected up in 2015 at 5.04 bp (up from 4.85 bp) for pork and 7.63 bp (up from 7.53 bp) for chicken. Both meats are expected to have slightly more per capita availability in 2015 that in 2014.
Corn and soybeans
The first projections of the 2014/2015 corn crop are in and have some attractive details… depending on what side one takes in looking at it. Planted and harvested acres for new-crop corn is down—91.7 million acres and 84.3 million acres respectively—but combined with an expected record average yield of 165.3 bushels per acre, the total production of 13.94 billion bushels was predicted. If accurate, this would be a record crop production for corn.
The decline in acres planted to corn came from more acres planted in soybeans as a result of this year’s low corn prices. Still, with projections of a record production year, estimates of average prices for the 2014/2015 corn crop are decidedly lower than old crop corn prices. USDA predicts an average farm price for new crop corn ranging from $3.85-4.55/bushel. Despite this, the CME March 2015 and May 2015 corn contracts were trading above $5/ bu.
Planting progress for corn sped up drastically last week. From May 4 to May 11 (the most recent Crop Progress report as of printing) showed corn planting across the country doubled in that one week, from 29 to 59 percent complete. This puts the corn planting rate well above the same week last year and in line with the five-year average of 58 percent.
“Mix a little good weather with a lot of modern technology and you get a crop planted in a hurry!” reported Steve Meyer and Len Steiner of the CME Daily Livestock Report. “Big planters and satelliteguided tractors can accomplish a great deal in a short period of time. Midwestern rains will slow progress some this week but it appears to us that the lion’s share of the market’s ‘late-planting’ risk premium has been removed from new crop corn futures.”
Soybean planting progress similarly shot up, going from 5 percent in the week ending May 4, to 20 percent ending on May 11. At 20 percent, year-to-year planting progress for soybeans is in line with the five-year average.
“Bottom line: Planting progress is important but not nearly as critical for yields as a host of other factors yet to be seen,” concluded Meyer and Steiner.
Estimates for the 2014/2015 soybean crop directly grew from lost corn acres and then some. An estimated 81.5 million acres will be planted in soybeans, up 5 million from the 2013/2014 crop. With 80.5 million acres expected to be harvested at a 45.2 bushels per acre yield, overall soybean production is estimated at 3.64 billion bushels.
This estimated production level for the 2014/2015 bean crop prompted USDA to project a $9.75-11.75 annual average farm price. The March and May contracts for 2015 soybeans were running above $12/bu at the time of publishing. — Kerry Halladay, WLJ Editor