2005 corn harvest projections tenuous
— Weather improvement needed.
— Yields of 130 bushels could create $3 corn.
Recent slides in feeder cattle prices have been more the result of domestic market fundamentals than a heavy influx of cattle coming in from Canada, according to several market analysts. One of the primary domestic market indicators pressuring prices lately has been forecasts for higher corn prices.
During mid-July, USDA commodity reporters forecasted that this year’s corn crop would yield an average of 145 bushels per acre, 15 bushels smaller than last year. However, independent market analysts called USDA’s projection pretty optimistic, with most forecasts ranging between 135-140 bushels per acre.
At 145 bushels per acre, USDA said corn prices should stay between $1.70-2.10 per bushel, however, Jim Robb, chief analyst at the Livestock Marketing Information Center said even that lofty of an average yield should keep corn around $2 per bushel.
“I think that’s pretty optimistic right now,” said Robb. “This year’s corn crop is at a critical stage right now, particularly in Iowa, Ohio and other eastern portions of the Corn Belt where temperatures haven’t moderated to help the tasseling and pollination of this year’s crop.”
Robb and several colleagues said it wouldn’t be surprising to see average yields drop below 140 per acre. He added that if summer temperatures didn’t start to cool down, 130 bushel yields might be possible.
“If that happens, it’s likely $3 (per bushel) corn could be seen, even as the new crop is harvested,” Robb said. “With calf and yearling prices where they’re at right now, that could be devastating to feedlots’ breakevens and any opportunity for profit into next year becomes even more unlikely.”
One thing that could help keep overall corn production higher-than-average this year is a half-to three-quarter-of-a-million acre increase in corn acres planted.
Last year, farmers planted a total of 80.93 million acres in corn, with about 73.63 million of them being harvested for grain. This year, estimates are that 81.59 million acres were planted in corn with 74.37 million to be harvested for grain purposes.
Last year’s corn crop was the largest in U.S. history, with 11.8 billion bushels being harvested in total. At an average yield of 140 bushels on 73.5 million acres, this year’s crop would be only about 10.3 billion bushels. At 130 bushels per acre, total production would be approximately 9.55 billion bushels.
Market analysts said that corn carryover into next year would be severely hampered because of significant production drops, increased demand for corn in the North American ethanol industry, and projections for higher exports, particularly to overseas markets that are suffering through drought right now.
USDA’s Foreign Agriculture Service has already projected a double-digit percentage increase in corn exports for the rest of this year, and first half of 2006, to Australia, which is really struggling to maintain any semblance of a cattle feeding industry due to drought.
“A slide in production, and kick up in demand could start to weigh on the cattle industry,” said Robb. “We will know more come mid-August when the impact from weather becomes more clear.”
If corn does get up to $3, most sources said that breakevens on fed cattle for the very late fall and winter market could theoretically jump to $94 or higher. Currently, breakevens on those cattle are hovering around $90. — Steven D. Vetter, WLJ Editor
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