… With farmers expected to put more acres into corn in 2013 and the expectation of a return to more normal weather, corn futures prices are lower.

But lower crop prices should help ease the feed cost pressure on livestock producers this year, the report said, helping support livestock profits. Futures markets also suggest livestock prices will rise in 2013...

 

 

In 2012, crop producers' gains were livestock industry's losses

 

Omaha World Herald (NE)

Jan 18, 2013

 

Last year's drought helped produce a “widening gulf in profitability'' between the U.S. crop and livestock sectors, according to a new report from the Federal Reserve Bank of Kansas City.

 

In spite of the drought, crop producers enjoyed near-record profits in 2012 as crop insurance payments and high crop prices offset the drought-shrunken yields. Conversely, the drought hammered the livestock industry, which saw steep losses for the second straight year because of crippling feed costs.

 

But the report released Thursday also suggested the pendulum on farm profits may be about to swing. Futures markets suggest lower crop prices this year — perhaps significantly lower. That should reduce incomes for grain producers while helping those who raise livestock. In the end, it all depends on what the weather holds for this year.

 

“Given tight supplies, agricultural markets will remain volatile and farm profitability will turn on U.S. weather patterns,'' the report said.

 

Overall, the 2012 drought did not keep farm profits from continuing their recent boom. A U.S. Department of Agriculture forecast late last year expected U.S. net farm income to reach $114 billion, the third-highest level on record and more than 50 percent above the average for the previous decade.

 

The drought also did nothing to diminish the recent rise seen in cropland values. The report indicated that in the third quarter of 2012, non-irrigated cropland values were up more than 30 percent year over year in Nebraska and the Dakotas, and up 18 percent in Iowa. Farm balance sheets remained fairly strong, with debt at relatively low levels.

 

While crop yields dipped in 2012, export demand remained strong. That helped boost corn prices by 30 percent and soybean prices by 23 percent, fueling the profitable year for grain farmers.

 

Livestock export demand and prices were also at historical highs. However, those gains were outstripped by feed costs that rose 18 percent. As the costs forced producers to liquidate herds, livestock prices fell, further exacerbating the losses. Similar losses were seen in the dairy sector, the report said.

 

With farmers expected to put more acres into corn in 2013 and the expectation of a return to more normal weather, corn futures prices are lower. That suggests lower corn prices this year. Crop incomes could fall significantly, the report said.

 

But lower crop prices should help ease the feed cost pressure on livestock producers this year, the report said, helping support livestock profits. Futures markets also suggest livestock prices will rise in 2013...

 

more

http://www.omaha.com/article/20130118/MONEY/701189953/1697