Lower prices may bring a switch to soybeans
NASHVILLE, Tenn. — Cheaper corn prices are expected to improve profitability in the U.S. livestock feeding industry and support cattle expansion in 2015.
“There is certainly a lot less anxiety out there in terms of worrying about the impact the price of corn will have on our margins than there was in the last 12 to 18 months,” said Mike Murphy, a grain market analyst with Cattlefax.
Corn stocks-to-use ratios around the world are expected to rise to the highest level in four years, he told the National Cattlemen’s Beef Association conference in Nashville Feb. 5.
World soybean supplies are expected to rise because of record large crops from Brazil and Argentina.
A stabilized corn supply has resulted in a $3 per bushel drop in the last 14 months in the United States.
“Now we are the cheapest commodity out there globally so we have seen corn exports up for this current marketing year,” Murphy said.
About 1.5 billion bushels were exported last year with expectations for increased shipments in 2014.
The 2014-15 crop is expected to add to the stocks if the weather co-operates. However, American farmers may decide to reduce their corn acreage in favour of soybeans. Murphy said corn plantings may decrease to 93 million acres from 95 million.
“That is a response to the economics of planting corn or soybeans,” he said.
Price forecasts place corn in a range of $4.10 to $4.75, a drastic change from the 2012 peak spot price of $6.94.
Corn use for ethanol will also stabilize. Distillers grain, which is a byproduct of ethanol production, sold at a premium to corn last year. More is likely to be dried down and exported.
“Over the long haul we’re going to use more corn for livestock, while usage for the ethanol is not expected to grow,” he said.
U.S. hay production improved last year as the drought area receded, but supplies are still at uncomfortable levels and another big production year is needed to rebuild stocks. He expects hay prices to fall, which should improve returns for cow-calf producers.
“As long as corn prices stay under pressure here for the remainder of 2014, we will see more pressure on hay prices from a U.S. perspective,” he said.
However, some areas may continue to see higher regional prices because of the lasting effects of drought.