Farmers took giant steps towards getting caught on planting spring crops last week, but the record acreage seeded doesn’t appear to have changed the rationale of prices in the fertilizer market. Dealers appear to be still filling orders off existing inventory. That’s keeping prices from any significant price gains in most areas but also means producers can’t take advantage of lower costs on wholesale markets this spring.

Ammonia appears steady for most producers, after pullbacks in a few retail markets. Prices on the Plains have stabilized with $780 the new normal, but costs to the east in the Corn Belt remain much higher. USDA put the average cost in Iowa steady at $882 this week, $100 or so above the fair value level suggested by current wholesale charges. Ammonia inventories were moving higher this winter, but remained in a long-term downtrend off the high levels that broke prices in the wake of the financial crisis of 2008-2009.

UAN looked for a while like it might become the nitrogen of choice due to late planting, but farmers found time to keep applying ammonia instead. Spot quotes at the Gulf finally reflected weaker summer contacts and dropped sharply to $270, $47.50 below earlier levels. Current fundamentals suggest a price around $355, and that Gulf index price would put the cost even $20 lower, close to where USDA reported the cost in South Carolina this week. Most other retail prices remain higher as inventory bought earlier is worked off. USDA reported the price in Iowa this week still at $382.50 for 28%, with quotes on the Plains still running $360 to $420.

Urea is showing signs of bottoming after a huge drop on international markets over the winter and spring. Prices were mixed for benchmarks: the Black Sea was up a couple bucks to $314.75, but the Gulf slid $3 to $322.50 and quotes out of the Middle East were also weaker. Summer quotes are $5 higher at the Gulf, however, though the Black is still lower than the nearby. Current benchmark prices and fundamentals suggest a retail fair value around $510, in line with quotes on the Plains. USDA put Iowa at $565 and South Carolina $610,

Phosphate prices were steady for DAP at the Gulf at $421, with adequate inventories this spring keeping prices subdued. While fair value based on wholesale costs is around $525, retail prices in Iowa and South Carolina surveyed by USDA this week were around $655, costs on the Plains were down to $590 to $605. MAP in Iowa was at also at $655, with the Plains at $615 to $630.

Potash remains mostly soft, though retail prices were mixed. USDA reported Iowa down $30 to $595, with North Carolina at $612.50 and South Carolina at $605. Updated prices sheets from the Plains were in the $540 to $565 range, with the bottom of the range close to our projected fair value of $530.

The Weekly Fertilizer Review is written and published by the Staff of Farm Futures Magazine

National Drought Summary — May 21, 2013

The discussion in the Looking Ahead section is simply a description of what the official national guidance from the National Weather Service (NWS) National Centers for Environmental Prediction is depicting for current areas of dryness and drought. The NWS forecast products utilized include the HPC 5-day QPF and 5-day Mean Temperature progs, the 6-10 Day Outlooks of Temperature and Precipitation Probability, and the 8-14 Day Outlooks of Temperature and Precipitation Probability, valid as of late Wednesday afternoon of the USDM release week. The NWS forecast web page used for this section is: http://www.cpc.ncep.noaa.gov/products/forecasts/.

Weather Summary: For several days in mid-May, corn planting and other Midwestern fieldwork accelerated in advance of a developing storm. Producers planted 43% of the U.S. corn crop during the week ending May 19, tying a weekly record set from May 4-10, 1992. However, heavy rain eventually overspread the northern Plains and Midwest, halting planting progress but providing further drought relief or eradication. The same storm responsible for the rain in the north-central U.S. contributed to a multi-day severe weather outbreak. Iowa’s longest stretch without a tornado (359 days from May 25, 2012, to May 18, 2013) ended when several twisters were spotted on May 19. Previously, Iowa’s longest spell of tornado-free weather lasted 355 days in 1955-56. One day after Iowa’s tornadoes, tragedy struck Moore, Oklahoma, on May 20 in the form of a devastating EF-5 twister—the nation’s first category five event since a similarly powerful tornado struck El Reno, Oklahoma, on May 24, 2011.

Several days of warmth preceded the storm across the western and central U.S. On May 14, a phenomenal surge of heat reached the central Plains and western Corn Belt, resulting in several monthly record highs and widespread readings above 100°F. Later, triple-digit heat developed and persisted in the south-central U.S. In addition, rainfall largely bypassed the southern High Plains, resulting in further deterioration in the condition of rangeland, pastures, and winter wheat. Hot, mostly dry weather also prevailed from California into the Southwest. Farther north, however, scattered showers provided beneficial moisture for crops and pastures in the Northwest. More significant precipitation dampened the northern Intermountain West, particularly across portions of Wyoming and southern Montana.

The East: Varying amounts of rain fell across the East during the drought-monitoring period. Little or no rain fell in the Northeastern areas of dryness (D0) and moderate drought (D1), except in northern New England. As a result, previously existing areas of dryness were bridged across Pennsylvania and New York. In New England, March 1 – May 21 precipitation totaled less than 6 inches in locations such as Portland, Maine (5.85 inches, or 52% of normal), and Providence, Rhode Island (5.83 inches, or 50 percent). Farther south, scattered showers and thunderstorms brought localized relief from dryness to the central Appalachians and the eastern Carolinas. Meanwhile, short-term rainfall deficits allowed for some development of abnormal dryness in southern Alabama and western Florida. In Dothan, Alabama, March 1 – May 21 rainfall totaled just 5.56 inches (49 percent of normal).

The Upper Midwest: Prior to the arrival of wet weather, sharp temperature fluctuations were noted in the upper Midwest. Following a late-season freeze on May 12, temperatures briefly soared. Tekamah, Nebraska, experienced a high of 108°F on May 14, eclipsing its monthly record of 105°F originally set on May 31, 1934. A monthly record from the Dust Bowl era (105°F on May 30, 1934) was also broken in Sioux City, Iowa, where the May 14 high soared to 106°F. In fact, there had never been a reading of 105°F or greater in Iowa before May 29; Sac City had achieved a high of 108°F on May 29, 1934. In Nebraska, records for the earliest triple-digit heat were set on May 14 in locations such as Grand Island (102°F), Omaha (101°F), and Lincoln (100°F); Grand Island’s record had stood since May 20, 1925. Several days later, showers and thunderstorms engulfed the upper Midwest, leading to significant reductions in the coverage and intensity of any lingering drought. Some of the heaviest rain fell in Minnesota, as well as neighboring areas in northern Iowa and northwestern Wisconsin. Rochester, Minnesota, in a part of the state no longer categorized as abnormally dry, set records for May (8.55 inches) and March-May precipitation (18.19 inches). Rochester’s previous records had been 8.41 inches in 1982 and 15.87 inches in 2001, respectively. With a total of 2.43 inches of rain on May 17, Rochester experienced its third-wettest day in May, behind 4.02 inches on May 17, 2000, and 2.97 inches on May 20, 1912.

The Great Plains: The gradient between improving conditions and worsening drought continued to sharpen. A winter-like storm delivered widespread, heavy precipitation (locally 4 inches or more) to the north-central U.S., including the Dakotas and parts of Montana and Nebraska. Significant rain also fell across the southeastern Plains, including central and eastern Oklahoma and northeastern Texas. In contrast, little or no precipitation fell across the southern High Plains. As a result, there were major reductions in drought coverage and intensity on the northern and southeastern Plains, but an increase in the areal coverage of exceptional drought (D4) and other drought categories on the southern High Plains. In Texas, the portion of the winter wheat rated very poor to poor increased from 44 to 76% between March 17 and May 19, according to USDA. Although some of the winter wheat deterioration was due to drought, a series of spring freezes also harmed the crop. Meanwhile, at least one-third of the rangeland and pastures were rated very poor to poor by May 19 in every Plains State except North Dakota. Lingering dismal pasture conditions in states such as Nebraska (69% very poor to poor) and South Dakota (51%) are due to the harm inflicted by the historic 2012 drought, in combination with a cool spring that delayed greening of grasses.

The West: Substantial precipitation fell during the monitoring period across the northern Intermountain West. Widespread totals in excess of 2 inches were noted in Wyoming and southern Montana, while 1- to 2-inch totals were reported in parts of northern Utah and eastern Idaho. As a result, there were reductions in the intensity of moderate to extreme drought (D1 to D3) in some of the wettest areas. However, the storm responsible for the heavy precipitation did not appreciably change spring and summer runoff forecasts, leaving varying degrees of long-term drought largely intact. Farther south, dry weather led to little or no change in the drought depiction. On May 19, USDA reported that at least 40% of the rangeland and pastures were rated very poor to poor in seven of the eleven Western States. New Mexico topped the list, with 98% of its rangeland and pastures rated very poor to poor, followed by Nevada (69%), Arizona (63%), Colorado (48%), Montana (47%), Wyoming (46%), and California (40%). In addition, below-average statewide reservoir storage affected five Western States: Arizona, Colorado, Nevada, New Mexico, and Oregon. Near-average overall storage should serve as a buffer against drought in the other Western States (California, Idaho, Montana, Utah, and Wyoming), except Washington, where reservoir storage was above average and there was no drought.

Hawaii, Alaska and Puerto Rico: There were no changes to the depictions for Hawaii, Alaska, and Puerto Rico. Hawaii’s western islands (Oahu westward) remain free of dryness and drought. However, islands from Maui eastward are still experiencing significant drought in leeward areas. USDA reported that recent rainfall in windward and mountain sections of Maui allowed for “improvement of pasture conditions in most areas.” The same report indicated that southern sections of Maui and Molokai had received some recent rain, but that those areas had previously dried out, “with no green forage for several months.” Meanwhile, Alaska was locked into an unusually cold weather pattern, with little precipitation reported in existing areas of abnormal dryness (D0) and moderate drought (D1). And, like last week, there was no drought (or dryness) in depicted in Puerto Rico.

Looking Ahead: During the next 5 days (May 23-27), the slow-moving storm system that has been affecting the Midwest—and was responsible for the tragic tornado in Moore, Oklahoma—will drift eastward. The system will reach the Atlantic Seaboard by May 24. Additional rainfall totals—in the form of locally severe thunderstorms—could reach 1 to 3 inches in the Northeast, and cool air will trail the storm into the Midwest and East. Meanwhile, an early-season heat wave will develop on the High Plains. During the Memorial Day weekend (May 25-27), temperatures will approach or reach 100°F as far north as the central High Plains. Elsewhere, cool, showery weather will persist in the Northwest, while thundershowers will return to the Plains. More substantial rain (possibly 1 to 3 inches) may develop during the Memorial Day weekend in the western Corn Belt, including parts of Iowa and eastern Nebraska.
The NWS 6- to 10-day outlook for May 28 – June 1 calls for above-normal temperatures from the Plains to the East Coast, while cooler-than-normal conditions will prevail in the West. Meanwhile, below-normal rainfall across most of the southern half of the U.S. will contrast with wetter-than-normal weather across the nation’s northern tier from the Pacific Northwest to the Great Lakes region.

Author: Brad Rippey, U.S. Department of Agriculture

Dryness Categories

D0 … Abnormally Dry … used for areas showing dryness but not yet in drought, or for areas recovering from drought.

Drought Intensity Categories
D1 … Moderate Drought
D2 … Severe Drought
D3 … Extreme Drought
D4 … Exceptional Drought

Drought or Dryness Types
S … Short-Term, typically 6 months (e.g. hydrology, ecology)

Updated May 22, 2013

See the three pictures below. Taken on May 4, 2013.

The 2012 drought proved too much for countless acres of row crops to handle last year. As farmers were forced to watch their dying crops starve from no moisture, livestock producers saw the writing on the wall. And early last fall, Kansas’ Brookover Feed Yards Manager Brian Brice knew it was just a matter of time before feedyards would be in the red.

“The margins right now are negative,” Brice told AgDay in September. “They’ve been negative all summer with losses up to $200 to $300 a head.”

2012, combined with the drought in 2011 that gripped much of the Plains, created losses so steep. Iowa State University Livestock Specialist Shane Ellis says liquidation became some producers’ only option.

“As pastures become in worse condition, forage becomes a little tighter and producers are basically forced into the decision of culling heavier than they normally would,” Ellis says.

According to USDA’s January Cattle Inventory Report, the nation’s calf crop has now dwindled to the smallest since 1949.

“The cow/calf operation is the engine behind the beef industry,” Ellis says. “And if you’re not producing the calves, you’re not going to have the engine of your industry revved up and going.”

The situation proved too much for even meat processors to handle. Cargill announced in January it would have to temporarily close its Plainview, Texas, plant until ranchers are able to rebuild their herds.

The pasture wasn’t any greener for hog producers last summer and fall. Iowa hog producer Todd Wiley had crunched the numbers in October to prepare for the tough road ahead.

“When I take all the numbers and put them together, we’re losing right at $57 per pig, today,” Wiley told AgDay.

Just like the cattle industry, pork producers were forced to make a difficult decision.

“For many operations, they’re pulling back into survival mode and cutting back on sow numbers and holding things back as much as they can, because they know for every hog they are producing, they’re going to be losing a tremendous amount of money,” Ellis told us last fall.

Despite heartaches in the record books, Wiley says tough times have helped pork producers be resilient.

“I think for the most part, we’re better managers than we were,” Wiley says. “We take care of business down the road a little further than we used to. And so, I’m hopeful that the damage, while it will be hard while it lasts, I’m hopeful it will be relatively short-term.”

According to USDA, half of all livestock production was located in severe or worse drought last year. The department says poultry farms were the least likely to be in areas affected by drought. However, turkey producer Katie Olthoff lives in the middle of drought-stricken Iowa.

“We’ve tried really hard to minimize our inputs in other areas and tried to be very efficient and use the best management practices possible, so we can make sure that we have big healthy birds going to market,” Olthoff told AgDay in October. “And then that’s going to help minimize any losses for us.”

Some elements were out of her control, like the scorching heat.

“Overnight one night, we lost 5% of one flock, which is a pretty good loss for us,” Olthoff says. “And that’s because it just didn’t cool down, and the heat was really hard on them.”

Overall, the livestock outlook continues to be dampened by high feed costs and lower production.

The latest National Ag Statistics Service (NASS) report shows total cow/calf numbers are down nearly 2%. States like Texas, Oklahoma and Missouri continue to see depleting herd sizes. And the total cattle inventory doesn’t paint a promising picture at the lowest level since 1952.

Ellis says it could be 2016, at the earliest, before “normal” enters back into beef supply conversations.

“Looking forward, if we were to have good years from here on out, I would not expect us to have an increased calf crop or an increased number of cows giving birth until 2015,” Ellis says. “And if you roll that on through as far as supplies of beef, we’re looking at 2016 or 2017 before we actually start having an increased animals going to slaughter and then availability in beef actually increasing.”

Some 1.2 billion people-almost a fifth of the world-live in areas of physical water scarcity, while another 1.6 billion face what can be called economic water shortage. The situation is only expected to worsen as population growth, climate change, investment and management shortfalls, and inefficient use of existing resources restrict the amount of water available to people, according to Worldwatch Institute’s Vital Signs Online service (www.worldwatch.org).

It is estimated that by 2025, 1.8 billion people will live in countries or regions with absolute water scarcity, with almost half of the world living in conditions of water stress.

Water scarcity has several definitions. Physical scarcity occurs when there is not enough water to meet demand; its symptoms include severe environmental degradation, declining groundwater, and unequal water distribution. Economic water scarcity occurs when there is a lack of investment and proper management to meet the demand of people who do not have the financial means to use existing water sources; the symptoms in this case normally include poor infrastructure.Large parts of Africa suffer from economic water scarcity.

World population is predicted to grow from 7 billion to 9.1 billion by 2050, putting a strain on water resources to meet increased food, energy, and industrial demands. But there are many other pressures, including increased urbanization and overconsumption, lack of proper management, and the looming threat of climate change.

According to the United Nations Food and Agriculture Organization and UN Water, global water use has been growing at more than twice the rate of population increase in the last century.

At the global level, 70 percent of water withdrawals are for the agricultural sector, 11 percent are to meet municipal demands, and 19 percent are for industrial needs. These numbers, however, are distorted by the few countries that have very high water withdrawals, such as China, India, and the United States.

Agricultural water withdrawal accounts for 44 percent of total water withdrawal among members of the Organisation for Economic Co-operation and Development (OECD), but this rises to more than 60 percent within the eight OECD countries that rely heavily on irrigated agriculture. In the four transitional economies of Brazil, Russia, India, and China, agriculture accounts for 74 percent of water withdrawals, but this ranges from 20 percent in Russia to 87 percent in India.

Policymakers must introduce a variety of measures to address global water scarcity. One important initiative is to support small-scale farmers.

Much of the public investment in agricultural water management has focused on large-scale irrigation systems. Farmers can also use water more efficiently by taking a number of steps, including growing a diverse array of crops suited to local conditions and adopting irrigation systems like “drip” lines that deliver water directly to plants’ roots.

Climate change will affect global water resources at varying levels. Reductions in river runoff and aquifer recharge are expected in the Mediterranean basin and in the semiarid areas of the Americas, Australia, and southern Africa, affecting water availability in regions that are already water-stressed.

In Asia, the large areas of irrigated land that rely on snowmelt and high mountain glaciers for water will be affected by changes in runoff patterns, while highly populated deltas are at risk from a combination of reduced inflows, increased salinity, and rising sea levels. And rising temperatures will translate into increased crop water demand everywhere.

To combat the effects of climate change, efforts must be made to follow an integrated water resource management approach on a global scale. This involves water management that recognizes the holistic nature of the water cycle and the importance of managing trade-offs within it, that emphasizes the importance of effective institutions, and that is inherently adaptive.

Further highlights from the report:

A region is said to face water scarcity when supplies fall below 1,000 cubic meters per person, and absolute water scarcity is when supplies drop below 500 cubic meters a year.

About 66 percent of Africa is arid or semiarid, and more than 300 million people in sub-Saharan Africa currently live on less than 1,000 cubic meters of water resources per person.

According to UN Water, each person in North America and Europe (excluding former Soviet Union countries) consumes at least 3 cubic meters per day of virtual water in imported food, compared with 1.4 cubic meters per day in Asia and 1.1 cubic meters per day in Africa.

Under current law as applied by USDA’s program agencies, Government payments directly paid to producers are expected to total $10.9 billion in 2013.

This payment level generally remains unchanged from 2012.

Direct payments under the Direct and Countercyclical Program (DCP) and the Average Crop Revenue Election Program (ACRE) are forecast at $4.94 billion for 2013.

Strong crop prices in 2013 are expected to result in price-based commodity program payments of about $15 million for the year.

These payments reflect final 2011-crop ACRE payments for rice and 2012-crop ACRE payments for other commodities.

This chart is found in the 2013 Farm Sector Income Forecast topic page (updated February 11, 2013).