« Agriculture

Strong Demand Keeping Prices Up

by Mike Austin

The USDA's latest report confirms what many in the trade had been saying all along. Even though production may be on the rise, demand is strong enough especially on the export market, and that is keeping prices up. A prime example is dairy where cow numbers, production per cow and total milk production is up, however....demand both domestically, but especially internationally, has prices holding firm. And even though the USDA does feel that milk production will continue to grow, the Outlook Board is still forecasting prices to rise. Now saying the Class 3 price will average $20.65 per hundredweight, and the All Milk price should come in around $22.80.

The story is similar for corn and soybeans. Even though everyone feels soybean acreage will be up and production out of South America is good, analysts are not forecasting a big increase in ending stocks because demand remains strong...especially coming out of China. Demand is also the key for corn projections. Exports, although off record levels, are still good and the rebound in feed usage and ethanol demand are high enough to have the USDA revise downward their ending stocks number.As a result the USDA has the mid-point price for Soybeans at $13.00 a bushel and the midpoint price for Corn at $4.40 a bushel.

For the livestock markets its supply that continues to be the driver. The PED virus continues to negatively impact the baby pig population and the USDA is now calling for an average hog price of over $70.00 a hundredweight. While the build-up of the beef market is still slow to develop and so the USDA is projecting the price for steers to average over $147.00 per hundredweight. Even broiler prices have been rising and are now projected to increase by 2 1/2% over last year.

Obviously these higher producer prices have resulted in some sticker shock at the grocery store. Still we haven't seen a lot of price resistance from consumers, although more are weighing their protein options. It will be interesting what we see in purchases during the upcoming barbecue season .