Eric Brown
The Fence Post

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January 31, 2014
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Ag economist: Good outlook for cattle producers, not so good for corn growers

Corn prices could fall below $4 this year for the first time since 2010 — not what farmers want to hear, but an offering of relief for many in the livestock industry, some of whom will be in “ag’s drivers seat” this year.

Those were among the main points made by Colorado State University agriculture economist and professor Stephen Koontz during his presentation at the Colorado Farm Show on Wednesday.

Koontz, who’s served as an ag economist for more than 25 years, stressed to his audience that, if U.S. farmers collectively plant 90 million acres of corn or more this spring, those abundant supplies might cause corn prices to fall even farther this year than where they’ve been in recent times, which has been around a “surprisingly low” $4.50 per bushel — far from the $8 levels they had reached in 2012 and 2013.

And because of increased production worldwide, Koontz predicts that even if U.S. farmers plant less than 90 million acres this spring, supplies worldwide will likely only allow corn prices to get up into the $5 range.

“That’s not great news for farmers,” said Koontz, explaining to the crowd that many farmers — especially those who rent a higher percentage of the land they farm, as opposed to owning it — need corn prices at about $5, just to be at a break-even level. “There might be some guys losing money on corn this year.”

Prospective planting reports from the U.S. Department of Agriculture will come out at the end of March, helping put things into better perspective, Koontz noted.

“How many hay fields in the upper Midwest that have become corn fields will go back to hay production this year?” Koontz asked. “We’ll just have to wait and see.”

He added, “Already, we haven’t seen as many corn acres go back into wheat production as was expected.”

The price of wheat — a crop that a number of Colorado farmers have planted more of in recent years, due to tighter supplies of water, among other reasons — is “lower than what it probably should be,” Koontz noted. “The price of wheat typically follows corn. But what doesn’t seem to be taken into account is that we’re seeing a lot of dry spots in wheat-growing places across the world ... meaning supplies could be tight and prices could increase. Those who are growing wheat might do well.”

Overall, the place to be in agriculture in 2014, Koontz said, is in cattle production.

Cattle supplies are historically low — after producers around the nation were forced to send animals to slaughter early during the 2012 drought — and those tight supplies have resulted in high prices for the cattle that remain.

That’s not great news for the feedyards that buy those cattle from ranchers, because they’ll be paying high prices for the livestock, but the lower corn prices and other feed costs will help them tremendously with their profit margins.

“What will help them (feedyards) even more is if global demand (for beef and fed cattle) is high,” Koontz said. “Exports will be especially important for them.”

The tight cattle supplies won’t help beef processors, like Greeley, Colo.-based JBS USA, which needs to process larger numbers of cattle to help cover its operating costs at the packing plants.

However, processors of other meats, like pork and chicken, should do well, helping companies who process a variety of meats — like JBS USA, which also owns and operates the large chicken processor, Pilgrim’s Pride. Chicken and hogs numbers are solid, meaning processors of those meats should do better this year.

“Overall, I see it as a bit of a down year for agriculture ... tough for some,” Koontz said. “But others could have great years ... the way it seems to usually go.” ❖


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The Fence Post Updated Jan 31, 2014 04:21PM Published Feb 12, 2014 04:03PM Copyright 2014 The Fence Post. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.