With  just  one  month  to  go  before  the  2014  US  corn  and  

soybean  harvest  is  secure,  weather  conditions  are  nearly  

perfect  in  the  Corn  Belt.  The  temperature  dropped  just  in  

time  for  pollination  and  stayed  relatively  low  in  the  month  of  

August.  With  every  passing  day  crop  failure  becomes  less  

likely  and  it  becomes  more  likely  that  a  record  amount  of  both  

corn  and  soybeans  will  be  produced  in  the  US  this  year.  As  

a  result,  the  market  prices  for  both  corn  and  soybeans  are  

falling.  

The  August  USDA  World  Agricultural  Supply  and  Demand  

report  (WASDE)  predicted  a  huge  corn  crop  for  the  second  

larger  than  14  billion  bushels.  Ending  stocks  are  likely  to  be  

up  a  billion  bushels  between  2013  and  2015.      

Corn  –  USDA  August-­  Billions  of  Bushels2012-­2013   2013-­2014   2014-­2015

Beginning  Inventory 0.989 0.821 1.181

Harvest 10.780 13.925 14.032

Imports 0.162 0.035 0.030

Supply  Total 11.932 14.781 15.243

Ethanol 4.648 5.120 5.075

Exports 0.731 1.920 1.725

Feed 4.329 5.175 5.250

Total  Use 11.111 13.600 13.435

End  Inventory    0.821 1.181 1.808

Farm  Price $6.89 $4.45 $3.90

US  Ending  Stock  of  Corn  Millions  of  Bushels  USDA

 

The  August  report  continued  the  recent  trend  of  increasing  

world  ending  stock  of  corn.  World  ending  stock  in  2015  is  now  

138  MT  in  2013.  Larger  total  world  supplies  help  insure  lower  

corn  prices.  

 

World  Ending  Stock  of  Corn  MMT

 

The  price  of  corn  (on  the  farm  in  the  US)  dropped  from  $6.89  

per  bushel  in  the  2012-­2013  crop  year  to  $4.45  this  crop  year  

($275  to  $178  per  metric  ton)  and  it  is  likely  to  be  even  lower  

next  crop  year.  The  USDA  now  predicts  $3.90  ($156)  for  next  

crop  year  (2014-­2015).  It  would  not  be  surprising  to  see  corn  

prices  as  low  as  $3  per  bushel  at  times  ($120)  in  the  next  few  

months.    

Average  Farm  Price  of  Corn$/Bushel  by  Crop  Year

 

 

The  most  recent  crop  progress  report  of  August  11  shows  that  

54%  of  the  corn  has  reached  the  dough  stage,  which  is  8%  

above  the  2009-­2013  average.  In  addition,  73%  is  in  good  

or  excellent  condition.  This  compares  to  64%  last  year  at  the  

same  time.  Soybeans  setting  pods  is  also  on  schedule,  72%  

versus  65%  average  2009-­2013,  and  70%  of  the  soybeans  

are  in  good  or  excellent  condition.  Although  there  is  still  the  

possibility  of  a  drought  or  an  early  frost,  the  Corn  Belt  is  in  

good  shape.  The  touch  of  drought  in  the  western  part  of  Iowa  

evident  in  May  disappeared  completely.    As  of  August  12th,  

there  is  little  evidence  of  drought  anywhere  in  the  Corn  Belt.  

The  only  bad  news  related  to  grain  at  the  moment  is  the  

inability  of  the  rail  transportation  system  to  transport  all  of  

the  grain  that  will  need  to  move  in  the  US  this  fall.  A  sudden  

increase  in  the  use  of  the  rails  to  move  oil  out  of  North  Dakota  

in  the  last  few  years  reduced  the  ability  of  the  entire  system  

to  move  grain.  A  large  harvest  will  make  transportation  

problems  that  much  worse.  The  ones  to  bear  the  brunt  of  the  

transportation  problems  will  initially  be  grain  farmers.  

 

HARVEST  IS  NEARLY  SECURE  IN  THE  US

Vol.  22,  Issue  4

August  2014

By Dr. Paul AhoBroiler Economics

 

1

®

0

500

1000

1500

2000

Bushels 1304 1624 1673 1708 1128 989 821 1181 1808

2007 2008 2009 2010 2011 2012 2013 2014 2015

100110120130140150160170180190

MMT 147 144 128 132 138 171 188

2009 2010 2011 2012 2013 2014 2015

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

2009-­2010

2010-­2011

2011-­2012

2012-­2013

2013-­2014

2014-­2015

 

Soybeans    

June  and  has  remained  on  a  plateau  around  $350  per  short  

ton.  There  is  likely  to  be  another  leg  down  when  the  full  

measure  of  the  huge  harvest  in  the  US  is  realized.  

 

 

 

With  a  good  harvest  in  both  North  and  South  America,  the  

world  ending  stock  of  soybeans  is  expected  to  rise  to  85  

million  metric  tons  in  2015,  up  from  67  MT  this  year  and  56  

MT  last  year.  The  weight  of  massive  amounts  of  additional  

soybean  production  broke  the  stubbornly  high  market.  The  

shortage  is  over  and  a  period  of  abundant  supplies  began.  

The  ending  stock  in  the  US  is  particularly  notable.  From  just  

140  million  bushels  at  the  moment,  ending  stock  is  expected  

to  rise  to  430  million  bushels  in  2015.  For  the  end  of  the  

current  crop  year  (the  end  of  August),  there  are  few  beans  left  

in  the  country.  A  drought  this  year  would  have  been  disastrous  

for  users  of  soybeans.  Fortunately  no  drought  occurred  and  

stocks  have  a  good  chance  of  returning  to  comfortable  levels  

in  the  next  crop  year.      

 US  Ending  Stock  of  Soybeans  in  Millions  of  Bushels

 

World  Ending  Stock  of  Soybeans    Millions  of  Metric  Tons  (MMT)

Soybeans  remained  high  for  so  long  in  part  due  to  the  

seemingly  endless  rising  demand  in  China.  However,  

projections  for  use  in  China  are  for  slower  growth  in  soybean  

demand.  Chinese  soybean  imports  increased  an  average  

of  10  million  tons  every  two  years  since  2001.  However,  it  

now  appears  that  it  will  take  four  years  for  China  to  increase  

imports  by  another  10  million  metric  tons  giving  world  markets  

a  breather.    

China  -­  Soybean  Imports  MMT

     

US  Soybeans  –  USDA  August  –  Billions  of  Bushels  

   2012-­2013 2013-­2014 2014-­2015Harvest  3.034 3.289 3,816

Export  1.320 1.640 1.675

Total  Use  3.099 3.369 3,541

Ending  Inventory    141 140 430

Meal  Price  

short  ton

$468 $485 $360

2

050100150200250300350400450

MMT 138 151 170 210 141 140 430

2009 2010 2011 2012 2013 2014 2015

20

30

40

50

60

70

80

90

MMT 43 60 70 54 57 67 85

2009 2010 2011 2012 2013 2014 2015

01020304050607080

MMT 0 3 9 10 16 27 37 51 59 69 74 79

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2016

The  price  of  soybean  meal  next  crop  year  is  likely  to  fall  

for  next  crop  year  ($407  per  metric  ton).  Even  that  $110  

per  short  ton  correction  appears  to  understate  the  soybean  

crash.  There  may  be  times  in  the  next  few  months  when  the  

price  is  near  $300  per  short  ton.      

Price  of  Soybean  Meal  -­  Short  Ton

     

US  Chicken  Industry  Production  

The  US  chicken  industry  is  enjoying  a  rare  combination  of  

falling  grain  prices  and  relatively  high  chicken  prices.  This  is  

about  as  good  as  it  ever  gets  for  the  chicken  industry.  

The  price  of  boneless  breast  is  boosted  by  a  shortage  of  

both  beef  and  pork  combined  with  a  continued  shortage  

of  chicken  due  to  lack  of  breeders  and  lack  of  housing  for  

breeders.  The  number  of  chicks  placed  is  running  equal  to  

last  year  and  total  production  is  running  only  slightly  above  

last  year.  

The  following  graph  shows  the  weekly  chick  placement  

in  millions  moved  7  weeks  forward  to  estimate  chickens  

processed.  As  can  be  seen,  slaughter  in  2014  is  similar  to  

2013.  In  some  weeks  of  July  and  August  the  slaughter  was  

actually  lower  than  in  2013.  This  lack  of  expansion  is  bullish  

for  chicken  prices  since  the  industry  appears  to  be  unable,  

face  of  rising  demand.  

Weekly  Chick  Placement  -­  Millions7  Weeks  Forward  -­  2013  versus  2014

   

Production  cannot  increase  because  the  total  number  of  

breeders  is  restricted.  However,  the  comparison  to  the  

number  of  breeders  last  year  is  starting  to  change.  As  the  

gap  continues  to  widen  in  the  coming  months,  production  will  

begin  to  increase  over  year  earlier  numbers.  So  far  this  year,  

the  total  placement  of  new  pullet  hens  is  104%  of  last  year.  

 Layers  on  Hand  -­  Broiler  Breeding  Flock

US  broiler  production  is  now  projected  to  grow  only  1.5%  in  

2014.  Despite  the  market  incentive  to  increase  production,  

the  industry  was  simply  not  capable  to  increasing  production  

any  faster  this  year.  However,  next  year  production  will  not  

be  as  constrained.  The  USDA  predicts  an  increase  of  2.4%  

in  the  domestic  availability  of  chicken  next  year.  By  2016,  the  

industry  would  be  capable  of  even  faster  growth.  

US  Quarterly  Broiler  Production  Millions  Pounds  -­  USDA

 

Deboned  BreastThe  seasonal  increase  in  the  price  of  deboned  breast  

started  early  and  reached  $2  per  pound.  That  appears  to  

have  been  the  peak  price  for  this  year.  However,  the  drop  

off  from  peak  price  is  likely  to  be  slower  this  year  than  last.  

The  favorable  supply/demand  situation  for  deboned  breast  

continues  to  be  assisted  by  the  3%  decline  in  the  domestic  

supply  of  beef  and  a  1.5%  decline  in  the  supply  of  pork  this  

year.  It  is  hard  to  imagine  a  more  favorable  situation.  The  

supply  of  competing  meats  is  falling,  the  supply  of  chicken  

is  constrained  and  the  economy  continues  to  improve  

(although  slowly).  The  year  is  likely  to  end  with  deboned  

breast  at  least  30  cents  higher  than  the  end  of  last  year.  

Next  year,  beef  supply  is  projected  to  continue  dropping  but  

at  a  lower  rate,  just  1%.  Pork  supply  is  expected  to  increase  

by  1.4%.  If  history  is  any  guide,  by  2016  the  supply  of  all  

three  meats  could  be  increasing  at  a  rate  which  will  exceed  

Deboned  Breast  Price  -­  2014-­2014USDA  -­  Northeast  Price

 

3

$200

$250

$300

$350

$400

$450

$500

2009-­2010

2010-­2011

2011-­2012

2012-­2013

2013-­2014

2014-­2015

164

165

166

167

168

169

170

171

19-­Jul

26-­Jul

2-­Aug

9-­Aug

16-­Aug

23-­Aug

30-­Aug

6-­Sep

13-­Sep

20-­Sep

20142013

50000

51000

52000

53000

54000

55000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

20142013

9000

9200

9400

9600

9800

10000

1st  Q 2nd  Q 3rd  Q 4th  Q

20142013

100

120

140

160

180

200

220

Jan Mar May Jul Sept Nov

20142013

About  the  Author  -­  Paul  W.  Aho,  Ph.D.email:  PaulAho@PaulAho.com

Dr.   Paul   Aho   is   an   international   agribusiness   economist  specializing   in   projects   related   to   the   poultry   industry   and  

consulting   company   called   “Poultry   Perspective”.   In   this  

Aviagen  and  the  Aviagen  logo  are  trademarks  of  Aviagen  in  the  US  and  

other  countries.    All  other  brands  and  trademarks  are  the  trademarks  of  

their  respective  owners.

©  2014  Aviagen.

Leg  Quarters

Russia,  as  expected,  cut  off  the  imports  of  US  leg  quarters  but  

the  news  had  surprisingly  little  effect  on  US  leg  quarter  prices.      

Russia  is  not  as  important  a  market  as  it  was  decades  ago  

although  it  was  the  second  largest  export  market  until  last  

week.  Evidently  other  international  markets  combined  with  

strong  domestic  demand  are  working  to  keep  leg  quarter  

prices  from  falling.  The  price  of  leg  quarters  can  be  expected  

to  be  approximately  5  cents  higher  at  the  end  of  this  year  

compared  to  last  year  despite  the  loss  of  the  Russian  market.  

Leg  Quarter  Price  -­  2013-­2014Cents  per  Pound  -­  USDA  Northeast  Price

   

Wings

Wing  prices  did  not  follow  boneless  breast  prices  upward  

this  year.  Prices  dipped  in  May  as  boneless  breast  continued  

upward.  The  year  could  end  with  wing  prices  similar  to  today’s  

levels.    

Whole  Wing  Prices  -­  2013-­2014USDA  Northeast  Price

 

thanks  to  falling  grain  prices  and  the  seasonal  increase  in  

chicken  prices.  Looking  forward  to  late  2014,  chicken  prices  

August  2014  

Leg  Quarters         $  0.52  per  pound    

Deboned  Breast     $  1.82  per  pound

Wings                                     $  1.47

Chicago  Corn           $  3.65  per  bushel  

Soybean  Meal       $  388/ton

Total  Cost  of  Eviscerated  Chicken                   $  0.71

Revenue                         $  0.87

Gain  (Loss)  per  pound           $  0.17

December  2014  

Leg  Quarters             $  0.47  per  pound    

Deboned  Breast     $  1.60  per  pound

Wings                                   $  1.40

Chicago  Corn           $  3.25  per  bushel  

Soybean  Meal       $  325/Ton

Total  Cost  of  Eviscerated  Chicken                   $  0.67

Revenue                   $  0.79

Gain  (Loss)  per  pound           $  0.12

World  Chicken  Growth  RateSince  2010,  the  slowing  world  economy  dropped  the  world  

chicken  growth  rate  from  6%  in  2010  to  just  1%  this  year.  This  

year,  both  the  world  economy  and  the  chicken  growth  rate  

are  expected  to  reach  the  bottom  of  their  cycles  with  growth  

changing  direction  in  2015  and  beginning  to  accelerate  in  

2016.      

World  Chicken  Growth  Rate  &World  Economic  Growth  Rate

 

40

42

44

46

48

50

52

54

JanFebMarAprilMayJun Ju

lAugSept Oc

tNovDec

20132014

110120130140150160170180190200210

Jan Mar May Jul Sept Nov

20132014

0

1

2

3

4

5

6

7

2010 2011 2012 2013 2014 2015 2016

Chicken  GrowthWorld