The U.S. financial crisis of 2008 and subsequent economic recession along with the run-up in grain prices triggered by the renewable fuel standard and drought led to a period of decline in U.S. red meat and poultry production. Successive strong grain harvests and ethanol consumption hitting the 10 percent blend wall gave animal producers dramatically lower feed costs for the last two years.
Reduced supply of meat and lower feed cost yielded record profits, which has naturally fueled an increase in meat production, according to Dr. Thomas Elam, economist and principal, FarmEcon, LLC.
Building production capacity
Elam told the audience of WATT Global Media’s webinar, Grain forecast and poultry, beef price outlook for 2016-2017, that breeding flocks and herds have expanded in response to improved profitability. The U.S. is forecast to have record red meat and poultry production in 2016, completely recovering production lost as a result of combined impact of the Great Recession and high grain prices.
Monthly broiler pullet chick placements for hens that will produce offspring in 2016 have been running at around 68,000 head per month, which is around 6 percent higher than the previous peak monthly average which occurred before the drought of 2012.
Turkey breeder numbers and output have just recently recovered from losses due to avian influenza in 2015. Prices for whole birds, parts and breast meat have backed off from record high levels reached in 2015.
The beef cow herd is growing with improved forage supply and lower cattle feeding costs. Elam said that the cattle herd bottomed out in 2014. Growth in beef production volume is still lagging that of poultry and pork. He expects to see cattle and beef prices decline for the next three to four years, baring a major weather incident impacting forage or grain production.
He said that the growth of the sow herd slowed after expansion in 2014-2015 in response to lower pork prices.
How much corn will be planted?
Soil moisture levels in the major grain producing areas of the U.S. are good and relatively warm weather is resulting in good early progress getting crops planted. Dr. Christopher Hurt, professor, agricultural economics, Purdue University, said that the surprise so far was the 93.6 million acres that farmers told the USDA that they intended to plant in corn for this crop year. This total represents a 6 percent increase from last year and, if realized, would be the third largest total acreage planted in corn in the U.S. since 1944.
Most of the increased acreage will come from ground that had wheat on it in the past. The world stocks to use ratio for wheat is high this year at 33.8 percent, and the stocks to use ratio for wheat in the U.S. is even higher at 50 percent.
Hurt said he expects that the full 93.6 million acres will not be planted in corn and that some of this land will be used for soybeans instead. Corn and soybeans have lower stocks to use ratios presently in the U.S. at 14.6 and 11.3 percent, respectively. Hurt estimates that closer to 91.1 million acres will be planted in corn and that around 2 million more acres will be planted in soybeans than the planting intentions submitted by farmers, which was 82.2 million acres.
The webinar audience was asked how many acres of corn they thought would be planted in the U.S. this year. Of the 69 poll respondents, 57 percent said that less than the full 93.6 million acres would be planted. Only 20 percent said that more than the 93.6 million acres of corn would be planted.
Hurt projects a U.S. Farm Price for corn of $3.60 per bushel for the 2016-2017 crop year, which represents a $0.05 per bushel increase over the last crop year. The USDA preliminary projection for the 2016-2017 farm price for corn is $3.45 per bushel.
Hurt projects an average farm price for soybeans of $8.80 per bushel and a Decatur high-protein soybean meal price of $300 per ton for the 2016-2017 crop year. This represents a $15 per ton increase of the last crop year, and is $25 per ton higher than the USDA’s preliminary projection.