C36—Lancaster Farming, Saturday, September 19,1981
Near-record crop prospects moderate prices
WASHINGTON, D.C. - With
U.S. feed grain supplies next
season likely to be around 7 per
cent larger than this year, prices
will probably be somewhat lower.
Here’s a breakdown of prospective
average farm prices in 1981/82:
✓ Corn may average $2.70 to
$3.15 a bushel, compared with this
season's estimated $3.15;
✓ Sorghum, $2.50 to $2.90,
compared with $3 estimated for
this year;
Barley, $2.35 to $2.60, down
from $2.91;
Oats, $1.65 to $1.85, versus
$1.82.
According to USDA’s Economic
Research Service, these are
national averages—you can expect
prices to vary considerably during
the year with changes in demand,
in the volume of marketings, and
in prospects for 1982 crops here
and abroad. So, the prices you get
will depend to some extent on when
you sell.
Also, local prices may be higher
or lower than the national
averages depending on how far you
are from major markets, and other
special circumstances.
Larger feed grain crops expected
This year’s corn crop may be the
second largest on record. The
August forecast is for about 7.73
billion bushels, up 16 percent from
last year and exceeded only by the
Planting doubts
(Continued from Page C 34)
the first year in the reserve has
been rescinded.
Also, only 700 million bushels of
wheat can be in the reserve at one
time. As of August 1, the reserve
totaled 360 million bushels. A
review of the current features that
apply to the loan and reserve
programs may help you firm fart
of your marketing strategy.
You can place 1981 wheat under
the regular loan at $3.20 per
bushel. The interest rate is 14.5
percent (subject to a semiannual
review) and you may repay any
time during the 9-month term.
You can place the wheat into the
recently opened reserve at $3.50
per bushel. The interest rate is 14.5
percent for the first year only.
Thereafter, no interest is charged,
as long as the national average
farm price remains below the $4.65
trigger price.
You will also receive a prepaid
annual storage payment of 26.5
cents a bushel. Any time the
trigger price is reached, the loan
may be redeemed without penalty.
If prices continue above the trigger
price through the end of the month
plus an additional 30 days, storage
payments will end and the current
interest charges will resume.
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1979 harvest.
Weather, ot course, could still
alter this outlook. But based on
past events, chances are 2 out ot 3
that the com crop will not be more
than 525 million bushels above or
below the August forecast.
A corn crop ot 7.73 billion bushels
and a carryover of just over a
billion bushels this fall would make
a supply of 8.75 billion bushels for
the year ahead, 6 percent more
than this year’s supply but 5
percent less than the record
1979/80 supply.
Following are prospects tor
other feed gram crops as of August
1. Chances are 2 out of 3 the har
vest will fall within the ranges
shown.
Sorghum—forecast at 833 million
bushels, up 42 percent from last
year. Range: 780 to 890 million
bushels.
Barley—4B3 million bushels, up
35 percent. Range: 460 to 510
million bushels.
Oats—s 22 million bushels, 14
percent more. Range; 495 to 545
million bushels.
Combined production ot the tour
teed grams is forecast at about 236
million metric tons, almost a fifth
larger than last year and smaller
only than the 1979 harvest.
Larger U.S. feed gram crops will
account tor most of the expected 5-
percent increase in world
Unearned storage payments must
be refunded when the reserve loan
is repaid.
If you hold any outstanding 1980-
crop wheat loans, you may convert
these into the reserve program
until December 31. You wiH
receive an additional 30 cents per
bushel above the $3 loan, a prepaid
26.5 cents storage payment, and
the loan will be interest-free.
However, you can’t sell that wheat
without penalty until the $4.48-per
bushel release price is reached.
The penalty for early redemp
tion is now calculated a bit dif
ferently. The penalty is based upon
the time that has lapsed since the
reserve was in the release status.
For wheat, release status ended 9
months ago. For wheat placed in
the reserve after December, the
penalty is based on the date of
entry.
For example, as of September,
total repayment of older reserve
loans (those secured before last
December) would require 1) the
principal plus 9 months’ interest,
2) all prepaid storage payments
plus 9 months’ interest, and 3) and
interest surcharge on the principal
equal to one-half of the loan rate at
the time of repayment (7.25 per
cent) for 9 months.
production of coarse grains, which
will provide for both an increase in
world consumption and a modest
buildup m stocks during 1981/82.
World coarse gram trade may be
up 5 million tons from this season
to a record 110 million metric tons.
For U.S. fanners, who always
supply the lion's share of world
coarse grain trade, this points to
record exports in 1981/82
probably around 73 million metric
tons, nearly 6 percent more than
this season.
U.S. carryover stocks of each ot
the four feed grams will likely be
larger next season, with total feed
gram stocks around 41 million
metric tons at the end of the
marketing year, up from 32.5
million estimated for this year.
The corn carryover may be about
1.3 billion bushels, versus just over
a billion expected on October 1,
1981.
Expanded use to help shore up
prices
Domestic use ot feed grains next
season may- total around 155
million metric tons, almost 4
percent more than the current
level.
Roughly 129 million metric tons
will be ted to U.S. livestock and
poultry, versus an estimated 125
million this year. This estimate
assumes higher feeding rates this
winter under more typical weather
conditions than last year’s
unusually mild winter.
More will be ted to cattle,
broilers, and turkeys, but less to
hogs. Pork output will continue to
decline well into 19112. An expected
increase in wheat feeding, due to
the record large crop this year,
will moderate feeding ot teed
grains in some areas, especially in
the gram-deficit Southeast.
Food, seed, and industrial uses
are likely Jo take a- record 26
.million metric tons, up 2 million
<8
I'M NOT
L10N...
The Classified
Livestock
Section
Has Beastly
Selections!
tons from the alltime high
projected tor this year. Biggest
gamer—corn gomg to make fuel
alcohol and high tructose corn
syrup.
What to watch now:
Check out forward contract
opportunities. Now’s a good time to
find out what kind of arrangements
are available m your area.
Watch storage availability and
costs. Estimates of U.S. crop
production and movement ot gram
through marketing channels this
summer suggest the crunch on
storage facilities during harvest
will be no greater than usual.
Consider CCC price support
loans. Gram must be m approved
storage facilities to be eligible tor
9-month price support loans or tor
the farmer-owned reserve.
In states where sizable amounts
ot gram must be stored tem
porarily on the ground, State ASCS
Committees are authorized to
provide 90-day distress loans to
farmers. The interest rate is 14-Vz
percent, the same as tor regular 9-
month loans and tor the first year
ot reserve loans. With distress
loans, hoVrever, borrowers cannot
forfeit gram m lieu of repaying
prmcipal and mterest. Check with
your county ASCS office tor
details.
Figure the cost of handling grain
for later sale
Compare the mterest you are
paying for loans, any ott-tarm
storage charges on the gram you
are holding, and the returns you
could earn trom investing cash
obtained by selling gram now.
Next, estimate how long you ex
pect to hold the gram and the price
you could sell it for then. This will
give you some idea whether it will
pay you to hold gram and tor how
long. .
For example, suppose you could
sell your-'com for $3 a bushel at
harvest but think you probably
could get a higher price about 4
months later. If you put it under
price support loan to get some
ready cash, how much would
prices have to rise in 4 months to
make storage pay off?
The CCC interest rate is 14‘/a
percent now, but will be adjusted
on October 1 and April 1 to reflect
the cost of borrowing money from
the U.S. Treasury. The national
average loan rate on regular 9-
month loans tor 1981 corn is $2.40
per bushel; the rate in your county
may differ by a few cents. For
illustration, let’s use the 14-‘/2-
percent rate and the $2.40 loan
rate.
Also, let’s assume that if you sold
corn for cash at harvest rather
than putting it under loan, you put
the receipts in the money market
where you earn, say, IB percent
interest.
Figure the amount of interest
per month per bushel that you are
forfeiting by putting corn under
loan at $2.40 instead of selling it for
$3.
0.16x(53-$2.40 ) =o.B‘ per bu.
12mos.
Figure the monthly interest you
pay on the (JC(J loan:
0.145x52.40=2.F per bu.
12mos.
Your total monthly cost per
bushel for keeping com under CCC
loan—and assuming you store it in
your own tacihtes—works out to 3.7
cents a bushel (0.8 cents + 2.0
cents = 3.7 cents;.
In this example, prices -would
have to rise by 3.7 cents a month to
make returns from holding corn
under loan equal to returns from
selling it at harvest tor $3.
Therefore, to come out even, you
wbuld haye to expect corn prices to
" ' (Turn to Page C 37)