Crop Market Update: January 30, 2015

Corn prices have dropped off a bit despite positive news filtering in over the last week. Thursday’s Greenville cash corn is 16 cents lower than a week ago, while nearby March futures contracts are also 16 cents lower than a week ago. Export demand has remained steady with 886,825 tons inspected for export, up from the 736,756 tons exported this week a year ago.  Looking forward, there is still a positive tone to the market with an expected decline in planted acres this spring, but with the struggling soybean market may also pull corn down with it.

Soybean markets have held steady over the last week with strong demand and a slow South American harvest. South America is still expected to bring in a record soybean harvest this year, although it may be slightly smaller than previously expected. U.S. soybean exports have remained strong, with the USDA reporting 1.522 million tons inspected for export over the last week. China has made some large purchases over the last week to ease concerns of their cancellations earlier this month. As of Thursday, Greenville cash soybeans were a penny lower on the week and more than $3.00/bu lower than a year ago.

Wheat prices have continued to drop after leveling off two weeks ago. Greenville cash wheat is trading 29 cents lower than a week ago and nearby wheat futures are also 29 cents lower on the week. Weather conditions in the Black Sea region have been favorable and rain is expected to move through the Southern Plains over the weekend, which will improve soil moisture conditions going into spring. Exports were better than expected, with 263,035 tons inspected but are still well below last year’s export numbers.

For more detail on crop futures and Mississippi local crop prices click here.

What do expert economists know?

Warning: thinking about this topic may blow your mind.

First some background before getting to my main point:

One thing environmental economists do is estimate the value of things we like about the environment (more birdies, cleaner air, etc.). The purpose of this is that the estimates can be compared to costs of obtaining these things we like about the environment. One tool environmental economists use for this purpose is stated preference surveys – surveys in which you put the respondent in a hypothetical situation in which he or she must make a tradeoff between money and some (usually) improvement in the environment.

These surveys have been used by decades, but some economists question the validity of the estimates derived therefrom. The debate is multifaceted (for more info, read the contingent valuation symposium articles here), but one suggestion made by super-famous economist/econometrician and noted stated preference survey detractor Jerry Hausman is that, rather than administering such surveys to the general public, it would be better to get a team of “experts” to assess these values. Remember this. (Key point: “value” refers to the value to individuals. It has always been counterintuitive to me that experts would be better judges of the value of something to people than those people themselves would be.)

Now to the story:

A team of stated preference survey practitioners (among them Richard Carson, who would probably be considered the foremost expert on the practice, and he’s an MSU alum to boot!) recently conducted a Delphi survey on the value of protecting the Amazon rainforest to people in countries outside of South America. A Delphi survey is one in which expert opinion is elicited about some topic, a summary of their responses are then provided in a second round of the survey, and the experts are then allowed to revise their original responses. In this case (read the study here), 216 expert environmental economists in stated preference methods from 36 countries (North America, Europe, Asia, Oceana) were asked to predict the mean and median value to the average person in the expert’s home country for protecting the Amazon rainforest from further destruction through the year 2050. (Your own Drs. Interis and Petrolia were among these experts.)

The data show that experts predict that the value, per year until 2050, range from $4-$36 in the Asian countries to near $100 in Canada, Germany and Norway, with other countries lying in between (note: the measure of value used was willingness to pay, which generally increases as income increases, so the higher values for wealthier nations makes sense). There are many more interesting findings of the paper which you can read about within the paper, but one of the most interesting things is that the Delphi method hasn’t really been used before for estimating environmental values.

Now back to the debate I mentioned above:

The authors state that they intend to conduct actual general-population stated preference surveys in several of the nations represented by the experts in this study. They say in this paper that “A large discrepancy between the Delphi exercises and the population surveys…may signal a need for further analysis of our overall valuation approach.” It’s not exactly clear what they mean by “our overall valuation approach” but when I read it I interpreted it as referring to stated preference valuation in general.

I think this may be a coy reference to Hausman’s complaint about stated preference methods that I mentioned above – if experts do not do a good job of predicting what the results of a general-population survey would be, then one would wonder if relying on a panel of experts (instead of going to the general population) would be a good approach. Of course, I’m assuming here that people are better judges of their own values than experts are (call this Stance 1), but the reason Hausman made the suggestion in the first place was because he believed the opposite: that experts are better judges of people’s values (at least when it comes to values of environmental public goods that are elicited with stated preference methods) than the people themselves (call this stance 2).

So this is a really interesting problem (if you don’t think so, you’ve probably stopped reading by now). All economists agree that “value” is a subjective measure, but the question is whether experts or people themselves are better judges of people’s values. This problem might be partially resolved if we had some other measure of value that people of both Stance 1 and Stance 2 could agree were correct – then we could compare estimates from experts and estimates from the general public to see which were more accurate (i.e. closer to this third measure that they agree on). BUT, there are two problems with this. First, there are other ways to measure values of public goods (generally called revealed preference approaches), but these have their own problems and weaknesses and can’t generally be judged to be more or less reliable (i.e. more or less “accurate”) than stated preference approaches. And second, when it comes to certain types of environmental values (e.g. value the rainforest to someone just because it exists – and hey, you can’t argue with this because value is subjective!), stated preference methods are the only way to obtain estimates in the first place, so there’s no revealed preference estimate to compare it to.

I don’t know about you, but my mind boggles just thinking about this. But, if you’ve understood everything, especially the previous paragraph, you, like me, might be inclined to think that there can never be a resolution to this debate (about whether experts or people themselves are better judges of people’s values for environmental things that can be valued directly only with stated preference methods). So why bother debating? I’d say for several reasons: it’s our job as economists to try to answer pertinent questions, it’s important to understand multiple sides of an issue, and – not of any lesser importance – it’s fun. If economists didn’t have fun, they wouldn’t be economists after all.

So we’ll have to stay tuned to see if there is a follow up study that actually compares the expert predictions to actual estimates from a general population survey. Can’t wait!

Cattle Market Notes: Week Ending Jan 23, 2015

Cash Cattle:

Cash fed cattle were lower once again this week. The five-area fed steers price ended the week at $159.51, live, and $256.03, dressed; respectively, down $3.63 and $7.41. Cash trades in Texas and Kansas were reported at $160 for live cattle. In Nebraska, dressed sales were mostly $256 mid-week, while live sales came in at $159-$160 earlier in the week.

Feeder steers and heifers in Mississippi auction markets were called $10-$25 lower during the week. Cull cows and bulls were steady to $1 higher. In Oklahoma City, feeder steers and heifers were $5-$15 lower, while calves traded $10-$15 lower.

[ … For Livestock Prices and Production data and trends CLICK HERE … ]

Futures:

Cattle futures took another hit this week, but the drop was not nearly as severe as the past two weeks. In fact, most live and feeder contracts attempted a rally on Wednesday and Thursday. Both cash fed cattle and wholesale boxed beef were lower, which pressured markets. USDA released their monthly Cattle on Feed report Friday. The report revealed more cattle in feedlots versus one year ago, but inventories were lower than expected due to a much smaller amount of placements. For more detail on this report CLICK HERE.

Corn futures were mostly steady compared to last Friday’s close. Early in the week prices began to rise, but the rally lost steam midweek giving up most of the early week gains. Exports showed improvements in early week reports, but global grain production continues to expand. For more on the grain markets check out Dr. Willams’ write-up (CLICK HERE).

Beef:

Wholesale boxed beef prices were lower. Choice boxes averaged $256.85, down $4.66. Select boxes ended the week at an average of $248.64, down $3.49.

Note: all cattle and beef prices are quoted in dollars per hundredweight and corn prices are quoted in dollars per bushel, unless stated otherwise.

January Cattle on Feed Report Recap

The United States Department of Agriculture’s National Agricultural Statistics Service (USDA, NASS) released their monthly Cattle on Feed report Friday afternoon (Jan 23). The report revealed that 10.690 million head of cattle were in U.S. feedlots with a capacity of 1,000 head or larger on January 1, 2015. Placements into feedlots during the month of December, which included one additional business day compared to December 2013, totaled 1.544 million head while marketings during the same month totaled 1.655 million head.

[ … For detailed numbers and charts CLICK HERE … ]

Placements totaled 1.544 million head, a decrease of 8.1% from December 2013 and a 6.4% decrease from the five-year average from 2009 to 2013. Market analyst expected placements to come in at 1.681 million head, so the reported value was much lower than anticipated and even below the lowest guess of a 7.7% decline. This marks the third lowest December placement number on record since 1996.

Cattle placed in major feeding states (Texas, Nebraska, Kansas, and Colorado) were, at the very least, not positive for weight categories below 800 pounds. Texas saw smaller year-over-year placements of 800 pound and heavier cattle, Colorado had even placements for this weight group, while Nebraska and Kansas had more 800 plus weight cattle placed. As a result, the average placement weight continued the recent trend of being higher versus year ago and five year average levels.

Cattle marketed in December totaled 1.655 million head. This put marketings down 4.7% versus last year and down 5.6% compared to the average from 2009 to 2013. Pre-report expectations called for marketings to be 4.4% lower than the same period last year.

The total number of cattle in feedlots with 1,000 head or larger capacity totaled 10.690 million head, up 0.9% versus January 1, 2014 but 4.8% lower than the five-year average.  Market analyst expected a 1.6% year-over-year increase in cattle inventories, with smallest guess looking for a 0.8% increase, meaning the reported value was very near the bottom end of expectations.

The report also provided a break-out on the types of cattle in feedlots (i.e., steers, heifers, cows/bulls). There were 6.935 million head of steers in feedlots with 1,000 head or larger capacity on January 1, 2015, a 2.3% increase from last year. Heifers totaled 3.671 million head, down 1.6% from one year ago; and cows/bulls totaled 84,000 head, up 5%. The smaller number of heifers in feedlots will likely add to the story-line of increased heifer retention and growth in the beef herd. More will be known this coming week with the annual Cattle Inventory report.

A break down on the numbers can be found at this link: http://goo.gl/1M4YXv

Crop Market Update: January 23, 2015

After falling from late December to Mid-January, corn prices are trying to slowly bounce back. Wednesday’s Greenville cash corn is eight cents higher than a week ago, as are nearby March futures contracts. Declining gas prices have put pressure on the Ethanol industry, cutting their margins to the worst levels in two years. Export demand has remained steady despite a stronger dollar. Looking forward, there is a bit of a positive tone to the market as a result of an expected decline in planted acres this spring, but without the strong support the market has seen in the past few years, things can quickly turn the other direction.

Soybean markets have continued to struggle the last couple of weeks as expectations continue to build over a significant increase in acreage over last year’s record. South America is also expecting to bring in a record soybean harvest this year, with some experts bumping Brazilian production estimates up by 2.8 million metric tons yesterday. U.S. soybean exports have been strong, with the USDA reporting a 6.5 million bushel purchase from China yesterday and a weekly total of 1.5 million metric tons of soybeans inspected for export. As of Wednesday, Greenville cash soybeans were seven cents lower on the week and more than $3.00/bu lower than a year ago.

Wheat prices have leveled off over the last week after enduring a month-long decline. Greenville cash wheat is trading four cents higher than a week ago and nearby wheat futures are also four cents higher on the week. Lower planted acreage reported last week likely has helped, but going in to spring weather will likely be the biggest driver of prices. The dollar continues to remain strong, with its value boosted further by the European Central Bank’s announcement of an aggressive bond purchasing strategy aimed at boosting the region’s economy. A stronger dollar could further dampen U.S. wheat exports.

For more detail on crop futures and Mississippi local crop prices click here.

Cattle Market Notes: Week Ending Jan 16, 2015

Cash Cattle:

Cash fed cattle were lower this week. The five-area fed steers price ended the week at $163.14, live, and $263.50, dressed; respectively, down $6.74 and $7.12. Cash trades in Kanas were reported at $163-$164.50 for live cattle. In Nebraska, dressed sales were mostly $263-$265 during the week, while live sales came in at $161-$165. Light trade in the Western Cornbelt trade was reported with prices at $162-$164 and $260-$265, respectively, for live and dressed.

Most steers and heifers in Mississippi auction markets were steady to slightly higher. Cull cows and bulls were steady. In Oklahoma City, feeder steers and heifers were $5-$10 lower. Few calves traded but those that did sold $8-$12 lower.

[ … For Livestock Prices and Production data and trends CLICK HERE … ]

Futures:

It was another sour week for cattle futures. Both live and feeder futures spent the bulk of the week in negative territory. Contracts finally ended the the slide on Friday. Cash markets were lower this week but wholesale beef moved higher, so the underlying sentiment was mixed. Fundamentals continue to be supportive given the limited availability of cattle and the continued support from consumers. USDA released their monthly supply and demand report on Monday (Jan 12) that increased estimated beef production in 2015 due to higher carcass weights. Pork prodution was also increased as a result of improved litter numbers.

Corn futures were lower this week. USDA released their monthly supply and demand report on Monday (Jan 12) that revealed a smaller production estimate due to a reduction in per acre yeilds, which reduced the amount of carryover. Traders were expecting mostly steady production and a slightly higher carryover. Soybeans had the opposite result, in that the report forecast higher carryover, while traders looked for a reduction. For more detail on the report regarding grains, see Dr. Williams’ write-up (CLICK HERE).

Beef:

Wholesale boxed beef prices were higher. Choice boxes averaged $261.51, up $8.75. Select boxes ended the week at an average of $252.13, up $8.90.

Note: all cattle and beef prices are quoted in dollars per hundredweight and corn prices are quoted in dollars per bushel, unless stated otherwise.

Corn Yields and Stocks Lowered, Soybean Yields Increased in the First WASDE Report of the Year

After leaving yields untouched in December, the USDA revised corn yields down from 173.4 bu/acre to 171 bu/acre in Monday’s World Agricultural Supply and Demand Estimates (WASDE). Feed and residual use was revised lower by 100 million bushels while corn used in ethanol production was revised up by 25 million bushels. Exports remained unchanged, leaving ending stocks 121 million bushels lower than last month’s estimates. Yields were 2.3 bu/acre lower than trade expectations while ending stocks were 50 million bushels lower than expectations. Global ending stocks for the 2014/15 crop are lowered by 3.05 million metric tons from last month, mostly due to a decrease of 3.5 million metric tons in global production. Although the WASDE report could be considered slightly bullish, the December Quarterly Grain Stocks report could feed the bears in the market. There is a record 11.202 billion bushels of corn in storage as of December 1, 2014, which is slightly higher than trade estimates of 11.12 billion bushels. The December 2014 grain stocks are 7% higher than a year ago.

Soybean yields were increased slightly to 47.8 bu/acre in the January WASDE report. Exports were also increased by 10 million bushels, which leaves soybean ending stocks unchanged at 410 million bushels. Yields came in close to pre-report expectations while ending stocks were 17 million bushels higher than market expectations. Global soybean ending stocks are up by 0.91 million metric tons with an increase in global production of 1.56 million metric tons. The U.S. and Brazil both saw an increase in production with Brazil’s production being revised up by 1.5 million metric tons. Overall, the report could be considered bearish with an increase in both U.S. and global ending stocks. Soybeans currently in storage is up 17% from a year ago at 2.52 billion, but is slightly lower than trade estimates of 2.59 billion bushels.

The new crop 2014/15 wheat ending stocks were increased by 33 million bushels from the December report as a result of a decrease in domestic feed use. Wheat production estimates remained unchanged this month. Global wheat stocks were revised up by 1.1 million metric tons with much of the increase coming from increased production. Wheat in storage is up 3% from a year ago at 1.52 billion bushels, slightly higher that trade estimates of 1.499 billion bushels. The biggest news for the wheat markets comes in the Winter Wheat Seedings report. Winter wheat acres seeded last fall are estimated to be at 40.452 million acres, down 5% from a year ago. That number comes in much lower than pre-trade estimates of 42.564 million acres and is more than a half a million acres below even the lowest trade estimate. Mississippi producers have planted 150,000 acres of wheat, about 35% lower than last year’s 230,000 acres.

For more detail on crop futures and Mississippi local crop prices click here. Detailed information on crop progress can be found here.

Cattle Market Notes: Week Ending Jan 09, 2015

Note: Happy New Year!! As always, please let me know what you like, dis-like, or want to see added to this market report. Your feedback is ALWAYS welcome! Provide a comment below, send me an email, or give me a call. I look forward to helping in any way possible in 2015!

Cash Cattle:

The headline from the first full week of trading in 2015 was largely a carry-over from the previous year, “Cash trading is at a standstill.” Expect this sentiment to continue as a result of smaller supplies and the continued move to formula type pricing. On Tuesday, Texas and Kansas sold live cattle at $168-$170.50. Cash trades in Nebraska on Wednesday were reported at $172 for live sales and $270 for dressed. Western Cornbelt trade came in at $170 and $270, respectively, for live and dressed.

After taking the holidays off, auction markets across the U.S. resumed activity this week. In Mississippi, 700-800 pound feeder steers averaged $204, 600-700 pound steers averaged $237.50, 500-600 pound steers averaged $270, and 400-500 pound steers averaged $303.75. Heifers in Mississippi were roughly 90% of steer prices. In Oklahoma City, #1 and #1-2 steers weighing 500-550 pounds were $291, while 750-800 pound #1 feeder steers were $232 and #1-2 feeder steers were $223.

[ … For Livestock Prices and Production data and trends CLICK HERE … ]

Futures:

Cattle futures also started the new year where last year ended… sliding south. On Friday, feeder cattle futures lost about $10 compared to the close on January 2. Live cattle futures gave up about $5-$7 over the course of the week. The U.S. economy has been in a bit of hang-over mode following the robust end to the year, supported by data for the fourth quarter that has been, at best, mixed. Beef demand continues to be questioned in spite of lower oil prices, which should translate into more available spending (or possibly more saving), but time will provide the answer. Still, traders appear to be cautious across all commodity sectors as oil has fallen.

Corn futures prices were mostly steady on the week. USDA will release their monthly supply and demand report on Monday (Jan 12).

Beef:

Wholesale boxed beef prices were higher. Choice boxes averaged $252.76, up $5.36. Select boxes ended the week at an average of $243.23, up $5.44.

Note: all cattle and beef prices are quoted in dollars per hundredweight and corn prices are quoted in dollars per bushel, unless stated otherwise.

Career opportunities in environmental economics

Students often ask me what kinds of jobs environmental economists get. Bob Hartzell has named his list of the top 5 career opportunities in environmental economics. They are (1) environmental consulting, (2) project management, (3) resources policy advocacy, (4) agricultural economics, and (5) resources management, and you can read about each on the hyperlink.

Most of these positions will require at least a master’s degree. And, in fact, in order to be hired to do the type of work that most economists do (in general, analyzing data to answer questions your employer wants the answer to), you’re going to need a master’s degree whether you’re an econ, agecon, or environmental econ major. And of course, if you go beyond a master’s degree and get a PhD, there are many more job opportunities available such as working in academia (i.e. being a professor), working for NGOs and government organizations, and working in the private sector.

I usually tell my undergraduate advisees that your graduation from MSU sends a signal to potential employers. The first signal, which doesn’t depend on your major, is that you were competent enough to graduate. And that’s saying something – not everyone can graduate, so if you do so, that says something about yourself. It first of all says that you were capable of passing your courses. But it also says you were organized, committed, and disciplined enough to spend about 4 years working towards your degree. If you go on and get a master’s degree or PhD, that signals that your expertise is probably greater than that of someone with only an undergrad degree and that, again, you were committed enough to pursue more advanced degrees.

The other signal your graduation sends pertains to your major. While both the history major and the environmental economics major are committed enough to graduate, the history major is probably more likely to enjoy reading and writing and to be able to, um, do whatever else it is history majors are good at (I don’t know because I’m not one). If you’re an economics major, it sends a signal that you are relatively strong in critical thinking and logic, and, if you’re an environmental economics major, you can think critically about environmental issues in particular and that maybe you have some knowledge of applied economics (analyzing data to answer questions).

Our Environmental Economics and Management (EEM) major is relatively young so we’ve had only a handful of graduates so far. But here are some of the things they’ve gone on to do after graduation:

  • Go to graduate school (Virginia Tech, USM, MSU)
  • Human Resource Management at Target
  • Environmental Professional at Nova Engineering and Environmental
  • Production Supervisor at Yokohama Tire
  • AmeriCorps Volunteer
  • Area Director for Ozone Ministries

You can see that some positions are more related to the environment than others based on their titles. Some of that may be due to the preferences of the graduates, but, in general, I’d say that regardless of what a student’s major is, many students don’t actually go into the field of their major directly after graduation. I myself was an economics (straight up, not ag or environmental) and music double major. After graduation I volunteered for AmeriCorps and then had several odd jobs that were related neither to music nor economics, until I entered graduate school for environmental economics after a 4 year hiatus from school. And that four year hiatus was important – it was during that time that I learned there was such a thing as environmental economics in the first place.

My own philosophy is that you needn’t be so attached to a particular career route as an undergraduate (but if you are, that’s perfectly fine). But that doesn’t mean you don’t need to be thinking ahead. My approach was to set myself up to have opportunities (if you don’t graduate, you’ll have fewer opportunities!), let a little time go by, learn about the world and my own preferences, and then make a more specific decision about a career path 4 years after graduating from undergrad. I’m sure many of our graduates will make career changes like I did as they progress in life. So be thinking about the opportunities you’d like to be setting yourself up for (different majors open yourself up to different types of opportunities!) as you choose your major and make decisions about graduate school and other possibilities after graduation.