“Risk management – you will not survive without it.” That warning came from Randy Blach, CEO of CattleFax, at the recent National Cattlemen’s Beef Association convention in Nashville, Tenn. Even though the message was aimed at beef producers, Blach says it is also advice for farmers, who face corn and soybean markets as volatile as those for cattle.
As December new-crop corn futures hover in the $4.50 per bushel range (they were trading at about $4.55 mid-Friday), spot corn prices continue to trend lower, says Mike Murphy, a CattleFax analyst who often concentrates on feed commodities.
“The long-term lower trend is expected to remain in place for spot corn prices, with risk down to the $3.60-$4.10 range from late spring to the fall,” Murphy says.
The large 2013 harvest is behind the still-low price prospects, he says, with USDA’s projected corn stocks-to-use ratio levels for 2013-2014 to run 12.5-14.5% through April (they were as low as 5% last summer when supplies were the tightest in years).
“Planted acres are still projected at 93.5 million for corn, 80 million for soybeans and 57.1 million for wheat,” Murphy says, adding with that many corn acres, “corn stocks-to-use levels for the 2014-2015 market year have the potential to build to 14-15%.
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CattleFax forecasts new-crop corn futures prices to range from $3.60-$4.75. That should open the door for timely risk management and present opportunities to make corn sales at higher levels.
USDA made long-term projections for corn and other commodities last week. It forecast moderate ethanol demand. “Nonetheless, a strong presence for ethanol in the sector continues, with about 35% of total corn use expected to go to ethanol production during the projection period,” USDA says.
Lower corn prices and increasing meat production should support feed and residual corn use, USDA says. However, supporting gains in feed use of corn is a slowdown in the growth in distillers grains production, an ethanol co-product.
Corn usage is impacted by the beef industry’s struggle to get the national cowherd rebuilt. Feeder cattle supplies are the tightest ever for feedyards. Drought and high calf prices have slowed replacement heifer retention on ranches.
“But the cowherd must expand,” Blach says. “If not, the beef industry won’t look the same in 5-10 years.”
That’s another indication that good risk management will be needed in order to take advantage of spikes in volatile grain markets, which will react to beef and other protein production.