Dry Areas Cause Concern

Dry weather over large parts of the US are beginning to worry grain traders and end users of corn and soybeans.  Most notable for cattle producers is the effect a dry growing season could have on feed prices.

The USDA’s World Agriculture Supply and Demand Estimates report currently projects US corn production at 15.148 billion bushels from 94 million planted and 86.7 million harvested acres.

But those estimates are based on normal weather conditions through the growing season, and the latest drought monitor from the National Oceanic and Atmospheric Administration shows wide expanses of important producing areas already seeing conditions ranging from abnormally dry to extreme drought.  And it’s only March 3.

 

CORN AREAS ON THE FRINGE

 

The USDA overlaid a graphic of the major drought areas with major corn producing areas to arrive at this graphic.  It shows the major corn areas of the Midwest and eastern Plains on the fringes of the current drought areas.

While it’s true that much of the US’ major corn growing areas are dodging the major drought bullet for now, market analysts worry that dry weather this early in the season could portend things to come.  Just how much this would affect the estimated corn production will depend on where and how severe any drought actually is.

 

WHEAT AREAS AFFECTED

 

Any thoughts that wheat will come to the rescue of cattle feeders as they look for alternatives should corn get too high may be premature as well, trade sources said.

Droughty areas encompass much of the Central Plains’ hard red winter wheat areas and a good portion of the soft red winter wheat areas of the Southeast.  Conditions still can improve and thwart what is shaping up to be difficult time for many producers, but they just as easily could expand.

The USDA World Outlook Board currently is projecting US wheat production at 2.310 billion bushels, compared with last year’s estimate of 2.062 billion, but, again, this is based on an assumption of normal weather conditions.

 

EL NINO TO THE RESCUE?

 

According to the Australian Bureau of Meteorology, said Tuesday that recent changes in the tropical Pacific Ocean and atmosphere and climate model outlooks suggest the likelihood of El Nino forming in 2017 has risen, even though the El Nino Southern Oscillation remains in the neutral zone.

Sea surface temperatures have been rising in the eastern Pacific Ocean and are now warmer than average for the first time since June, the ABM said.

El Nino doesn’t do much for the US during the warm season, though, so dryness now may be a harbinger of things to come.

Maybe.

 

CASH CATTLE STEADY TO HIGHER

 

Cash cattle prices were steady to higher Thursday at $125 to $126 per cwt on a live basis, compared with $124.50 to $125.50 on Wednesday.  Dressed-basis trades came in at $200 to $201, versus $195 to $196 last week.

Average fed cattle exchange auction prices Wednesday were $2.88 per cwt higher at $124.99, versus $122.11 a week earlier.  Cash cattle trading then was reported at $124.50 to $125.50 per cwt on a live basis, compared with the previous week at mostly $124 to $125.

The USDA’s choice cutout Thursday was up $1.67 per cwt at $208.35, while select was up $0.85 at $203.72.  The choice/select spread widened to $4.63 from $3.71 with 70 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Wednesday was $126.44 per cwt, down $0.59.  This compares with Thursday’s Mar settlement of $123.45, down $1.05.