Iowa Farmers Enjoying Good Prices Heading Into Harvest

Farmers have strong prices for corn, soybeans cattle and hogs as they begin harvest this fall. That's reason to smile unless you are one of those who doesn't have much of a crop to sell - thanks to flooding and other weather-related problems in soggy 2010 growing season.

Published on: Sep 13, 2010
USDA on September 10 lowered its estimate of the nation's corn harvest by 2%, to 13.2 billion bushels, from the August estimate. The government's September crop report was no surprise to the grain trade, which bid up corn prices in recent weeks based on reduced yield prospects. Iowa, the nation's leading corn producing state, has had flooding and other problems caused by one of the wettest summers on record in the state.

Because of the smaller corn crop forecast and an overall tightening of grain supplies, USDA raised its estimate of the average price that growers will likely get for this year's corn crop to $4.40 a bushel. That's 60 cents more than the price estimate USDA made in August. In other years higher corn prices would make it difficult for livestock producers and ethanol manufacturers, but this year prices for hogs, cattle and ethanol have risen sharply. Thus, thus sectors are remaining profitable even with the rise in the cost of their main input—corn.

Hog prices have been exceptionally strong recently, and are expected to continue that way for awhile. Profit margins on hogs were at $35 per head in August, according to Iowa State University economists. Hog producers should stay profitable into next summer, even though they'll be paying more for feed, says ISU Extension livestock economist Shane Ellis.  Live hogs have been trading at over 70 cents a pound this year, up 20 cents from last year. However, even with the increased profits this year, hog producers will only make up about 70% of what they lost last year, he says.

With slightly smaller crop, USDA predicts higher corn prices

Cattle prices this year have recently been running between 90 cents and $1 a pound and may go higher if the U.S. economy and demand for beef doesn't go into a downturn. Last year cattle feeders were losing money. Cattle and hog producers cut back on production and as a result are benefiting from higher beef and pork prices this year.

Corn ethanol into September 2010 has been trading on the Chicago Board of Trade for around $1.90 a gallon, up from $1.50 in early July.

The price of corn for December delivery rose to $4.78 a bushel on the Chicago Board of Trade on September 10, the day USDA released it's lower estimate for the corn crop. Corn futures had been trading well under $4 before beginning to increase in August, based on declining yield prospects. November soybean futures declined slightly on September 10 to less than $10.31 per bushel.

USDA September Crop Report shows decline in U.S. corn yield

USDA's September report estimates farmers nationwide will harvest an average of 162.5 bushels of corn per acre this year, down from the August estimate of 165 bushels per acre. The 13.1 billion bushel U.S. corn crop USDA is projecting would still break the record of 13.1 billion bushel set last year, but the lower forecast comes at a time of increasing world demand for grain. In a separate report also issued by USDA on September 10, the department estimated that corn stocks as a percent of this year's production will be the lowest in 15 years.

For Iowa, USDA is now estimating corn production at 2.327 billion bushels, with an average expected yield of 165 bushels per acre. That is unchanged from USDA's August estimate. Iowa produced 2.4 billion bushels of corn last year, when the average yield was 182 bushels per acre.

Corn yields in the Southern U.S. and parts of the Midwest are coming in lower than USDA had estimated a month ago. The price for corn could very well go higher, notes ISU's Hart, because once the government forecast starts to go lower it often continues to move lower in the following months. Big crops tend to get bigger and small crops tend to get smaller. Corn yields are likely to vary widely from county to county this year in Iowa. Corn in some areas has really suffered from flooding and excessive rain this summer in Iowa. You can have a great price but not very many bushels to sell.

For soybeans, USDA raised its yield estimate in September report

USDA's estimate of U.S. soybean production for 2010 was raised in the September 10 crop report. Total soybean production is estimated at 3.48 billion bushels nationally, up 1% from last month's forecast of 3.43 billion bushels. The average yield for the U.S. is estimated at 44.7 bushels per acre, up from 44 bushels estimated in August.

Thus, estimates of soybean production were raised both nationally and for Iowa as yield estimates increased, notes Chad Hart, ISU Extension grain marketing economist. Iowa farmers are expected to harvest 528 million bushels, up from last year's production of 486 million bushels. Iowa's yield is estimated at 52 bushels an acre, a one-bushel increase from last month's forecast.

Iowans skeptical on soybean yields, see demand staying strong

Randy Van Kooten, a Lynnville farmer who is president of the Iowa Soybean Association, is skeptical that soybean yields will be as high as USDA is forecasting. "What I'm hearing from early reports on soybeans that are being harvested is that yields are lower than expected," he says. He points to the outbreak of Sudden Death Syndrome that has hit a number of soybean fields this year in Iowa and some of the surrounding states. "But even if the areas not affected by SDS are so much better that they offset the badly impacted areas, the story still is that worldwide demand remains strong, as evidenced by USDA's lowering the 2010 and 2011 soybean stocks carryover projection."

Grant Kimberley, ISA's director of market development, agrees that demand for beans is strong. "Estimated exports have been raised in this September 10 report by USDA and we expect that USDA will probably raise the export estimates more in the future for the 2010 bean crop. As we witnessed on our recent ISA trade mission to China, that nation's economy remains strong and continues to grow. As a result, demand for soybeans will likely exceed current USDA projections, and we will need every soybean we can grow in the U.S."