News Releases

Livestock Feed Prices Soar

July 3, 2008

Scoular Manager Todd Strayer Comments on Prices, Crop Conditions in South Central Idaho

FARM & RANCH GUIDE, Cindy Snyder— Livestock producers already squeezed by high feed prices are watching those prices shoot even higher.

Livestock feed prices in south-central Idaho have increased $50 a ton within the last two weeks.

“And it doesn’t seem to be slowing down,” said Todd Strayer, manager of The Scoular Company in Jerome.

Weather is largely to blame for the increase, along with a report issued by the U.S. Department of Agriculture on June 10. In that monthly estimate of world grain supplies and demand, USDA forecasters shaved 5 bushels per acre off the estimated national corn yield compared to the April estimate. The new projection is for a national corn yield of 148.9 bushels per acre.

The per acre cut rattled the market and sent corn futures prices soaring. Most analysts were looking for a drop of 2 to 3 bushels per acre, said Mike Krueger, a commodity trader and ag market consultant from Fargo, N.D.

The last time the USDA dropped yield expectations that much was in 1995. December corn futures on the Chicago Board of Trade finished up 25.5 cents per bushel to settle at $7.65 per bushel on June 13 while November soybean contracts were up 18.5 cents per bushel to close at $15.31.

December soybean meal contracts closed at $386.5 per ton. In contrast, November soybean contracts were trading at $8.65 per bushel and July corn was trading around $4.10 per bushel a year ago.

Krueger has been saying for months that corn has the potential to do this year what wheat did last year – to “set all time highs by pretty substantial numbers.”

That’s not good news for livestock producers. In southern Idaho, break-even costs for dairy producers have climbed from $13 per hundredweight two to three years ago, to $17 per cwt. now.

“Several years ago, we would have been ecstatic with seventeen dollar milk, now it’s our break-even price,” said Bob Naerebout, executive director for the Idaho Dairymen’s Association. “It’s very important that the price of milk stay above seventeen dollars.”

Economists across the country are plugging in the USDA’s latest yield projections and coming up with dismal news. According to economists with the Chicago Mercantile Exchange’s Daily Livestock News, the roughly $40 per ton increase in feed costs reported in the first half of June is the largest increase in memory. They estimate the explosion in future feed prices will push break-even costs for pigs next summer above the $95 per cwt. mark.

In contrast, weighed average hog prices fell back below $70 per cwt. as processors in waterlogged Iowa struggled to deal with flood issues that are keeping workers home and threatening both water supplies and sewage-treatment systems needed to keep the plants operating.

Excessively wet conditions in the heart of the Corn Belt are not only threatening to further tighten an already tight corn supply but are also disrupting rail service and making it difficult to move feedstuffs into the Magic Valley. Barge traffic on the Mississippi River has also been affected, with one lock and a dam closed on the Upper Mississippi last week and more closures scheduled due to the flooding.

Producers and traders in the Midwest are drawing comparisons to 1993, when excessive moisture dropped planted acreage by 2.1 million acres and only 85.9 percent of the planted acres got harvested.

The difference between 1993 and 2008 is timing.

The 1993 flood occurred in mid-July after a long period of constant rains in the Upper Mississippi Valley. With the 2008 flood occurring earlier, there is still hope that a drier weather pattern will set up and allow yields to average around 148 bushel per acre for corn and 37 bushel per acre for soybeans.

If the 148 per bushel yield estimate holds, the 2008 corn crop won’t be bad, but “there’s no cushion,” Krueger said.

Midwest producers are not the only ones battling weather concerns. The unseasonably cool spring in southern Idaho has slowed both the corn and hay crops here and has producers worried about tonnage at harvest.

“We really need some warm weather to get this (crop) going,” Strayer said.