Cheaper corn will certainly help calf prices, but the greatest price support is still expected to come from the supply side.
The progress reports for the corn crop and the initial yield estimates make it increasingly likely that U.S. farmers will be harvesting the largest crop ever this fall. America’s farmers certainly delivered on the number of planted acres this spring, and the government crop reports make it appear that the only question left to be answered is whether Iowa or Illinois will win the yield contest. As the saying goes, it looks like a bin buster.
With that said, the basis in many areas continues to be unusually strong, demand for ethanol will only increase with cheaper corn, and corn is in pretty strong hands. Producers may not have the storage capacity for the record crop, but, financially speaking, a lot of farmers don’t necessarily have to sell their entire crop.
World supply and carryovers are still going to be fairly tight, especially considering the new era of corn use for energy. Certainly, Mother Nature and the American farmer have combined to give us what promises to be cheaper corn and feed compared to the last few years. However, the era of cheap corn is probably over at least until the dynamics of ethanol changes, or we string a few years like this year together.
Cheaper corn will certainly help calf prices, but the greatest price support is still expected to come from the supply side. The weather situation hasn’t only helped lower grain prices, but has improved grass and hay production as well. I say this with apologies to my friends who are still stuck in 3+ years of drought rivaling what was seen in the 1930s.
The bottom line is that better feed prospects may lay the foundation for the beginning of expansion. And that means fewer heifers going on feed, and even tighter supplies, down the road.
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