Economic Summit: Iowa a net corn importer
AMES, Iowa (Agriculture.com)--Pork and poultry production are likely to continue expanding in 2014, with pork exports picking up. As corn production rebounds from last year and ethanol production recovers, Iowa will be a net importer of corn this year. In just a few years, anhydrous ammonia won't be available to farmers, not because of environmental regulations but due to high shipping costs from railroads who don't want the liability of transporting it. And, if crop production stabilizes, so will corn prices, with land prices retracing by up to 40%.
Those are just a few of the sometimes astounding predictions coming from the second day of the Iowa Farm Bureau Federation's Economic Summit in Ames, Iowa, Tuesday.
Even though margins remain tight or negative for livestock producers, higher prices, including some record high pork prices, are encouraging expansion in pork and poultry production, said John Anderson, Deputy Chief Economist for the American Farm Bureau Federation.
"We'll see pork and poultry production start to acculturate," Anderson said. He expects poultry production to increase 2% and pork by 1% during the rest of this year, and more in 2014.
"Beef is going to continue to lose domestic market share," he said. Cow slaughter has been running ahead of last year, as ranchers continue to deal with tight hay supplies and drought in much of the southern Great Plains.
If USDA forecasts hold up, 2014 will be the first time since 1952, when pork production will be higher than beef production, Anderson said.
Cattle producers in Iowa, at least, will have more distillers grains available as the ethanol industry recovers from the drought of 2012.
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"We expect that in Iowa corn will flow into the state, on a net basis, not out of the state," said Ross Korves, an economic policy analyst with the Pro-Exporter Network. "The guessing is that we will produce ethanol at a normal rate, whatever you think normal is."
Korves' current estimate of the U.S. average corn yield this year is 152 bushels an acre, down from 155. Both are lower than USDA's latest 156.5 bushel number.
Lower projections of corn prices came from Jeff MacKenzie, an economist who is consulting for Orascom, an Egyptian company that is building a $1.8 billion fertilizer plant in southeast Iowa. He needed to estimate corn prices, since nitrogen fertilizer prices are linked to that commodity, he said
As global corn production rebounds, "The old $2.35 I believe is 4.37," he said of corn prices.
And, with less expensive natural gas becoming abundant in the interior of the U.S., nitrogen fertilizer production will move there from the Gulf Coast.
"I believe ammonia nitrogen will stabilize in price down to around $400 a ton from about $700 a ton currently," he said.
The U.S. has flipped from being the high-cost nitrogen fertilizer producer to among the lowest, said Mackenzie, whose client, Orascom, is the world's fourth largest fertilizer company.
Some other estimates from MacKenzie: the U.S. currently has between 93 million and 96 million acres of corn planted. Recovery of feed demand, "I think is overstated. I think it will take longer to come back."
And global corn production hits a new equilibrium, corn prices will range from $3.58 to $5.15 a bushel.
Prices that are lower than those spurred by last year's drought are also likely to mean lower land prices. MacKenzie
MacKenzie expects the more expensive land in the U.S. to fall by about 40%.
"I think that will happen over the next three or four years," he told Agriculture.com later.
MacKenzie told farmers at the summit held at Iowa State University that he expects anhydrous ammonia to eventually become uneconomic, and that its use will likely decline ahead of any potential environmental restrictions.
One railroad company told him that it's phasing out hauling ammonia over the next three years and another told him, "we don't want to haul your anhydrous ammonia at any price, period."