Iowa Farm Outlook & News

Headlines
  • May 2018 Cattle on Feed:
       U.S.: 1,000+ head: 11.558 million head, up 5.1% from last year
       Iowa: 1,000+ head: 730,000 head, up 7.4% from last year
       Iowa: < 1,000 head: 555,000 head, down 5.9% from last year
  • Apr. 2018 Cattle on Feed: Placements:
       U.S.: 1,000+ head: 1.695 million head, down 8.3% from last year
       Iowa: 1,000+ head: 80,000 head, down 15.8% from last year
       Iowa: < 1,000 head: 34,000 head, down 17.1% from last year
  • Apr. 2018 Cattle on Feed: Marketings:
       U.S.: 1,000+ head: 1.803 million head, up 5.9% from last year
       Iowa: 1,000+ head: 87,000 head, up 6.1% from last year
       Iowa: < 1,000 head: 47,000 head, down 17.5% from last year
  • June 2018 Prices for 2017/18 U.S. Crops:
       Corn $3.40 per bushel, steady from last month
       Soybean $9.40 per bushel, up 5 cents from last month
  • June 2018 Prices for 2018/19 U.S. Crops:
       Corn $3.90 per bushel, up 10 cents from last month
       Soybean $10.00 per bushel, steady from last month
Livestock
Cattle Prices (6/4/18)

Live cattle futures contracts have been on a roller coaster ride in 2018. In mid-February, the June contract peaked at $118.825 per cwt. It fell rather precipitously through the first week of April to a low at $99.625. The June contract recovered some to $104.80 by June 1. Corresponding cash markets have maintained relative firmness compared to the sharp declines seen in the June futures contract. Evidence of this is seen in 2018 deviations in basis, the difference between the cash price and the futures price, compared to historic basis norms. Eleven and ten weeks before expiration of the June 2018 contract, basis differences were dramatic. During 2012-2016, late-April cash prices averaged about a $9 per cwt premium to the June contract, last year a $15.50 per cwt premium, and this year that number was $19 per cwt. For a short hedger, selling May cattle ahead with this kind of basis was a dream. To illustrate, in the last week in April some cattle sold in Iowa for over $124 per cwt for delivery in May. In this case, a short hedger missed their predicted net price received but the basis prediction error was in their favor. That is, net price received was higher than predicted. If a $10 basis was expected using the five-year historical average, then the $19 actual basis resulted in a $9 per cwt higher price than expected. In the first four weeks of May Iowa/Minnesota cash fed cattle averaged a $13.66 premium over the June live cattle contract, over $6 per cwt higher than the 2012-16 average basis for those weeks and even $1 per cwt higher than last year's historically strong basis. Basis is attractive and is incentivizing cattle feeders to move fed cattle to market quickly.

Crops
Markets Are Rumbling, but Usage Heads Higher (6/12/18)

USDA's June update provided some positive news to tumbling markets. For soybeans, the storyline is higher domestic crush. Soybean meal demand is projected to be higher via both domestic livestock and exports. The combined effect across the 2017/18 and 2018/19 crop years is an additional 30 million bushels of crush. With no other changes in the soybean balance sheet, that change lowered ending stocks for both crop years and allowed USDA to raise the price projection for the 2017 crop, while holding the projection for 2018 steady. Current season-average price estimates now stand at $9.40 for the 2017 crop and $10.00 for 2018. For corn, there were a few shifts in usage, but the general story mimics soybean, greater usage, lower stocks, and slightly higher prices. For the 2017 crop, imports were lowered by 5 million bushels, while exports were raised by 75 million. For the 2018 crop, a drop in feed and residual use was more than offset by an increase in ethanol use. The shifts lowered the projected 2018/19 ending stocks to 1.577 billion bushels, which is roughly a half of a billion below the previous year. While USDA held the 2017/18 corn season-average price estimate at $3.40 per bushel, the estimate for 2018/19 was raised 10 cents to $3.90 per bushel.

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