Piles of U.S. corn cloud global corn stocks market
Piles of corn still sit at grain elevators across the country as a sign of a bountiful crop last fall. While that abundance contributes to higher than usual global corn stocks, it also is good news for American livestock producers and the corn export market.
Anton Bekkerman, associate professor of economics at Montana State University, said livestock prices have responded to the glut of corn in the marketplace. Producers have been able to capitalize upon cheaper feed prices thanks to the corn situation.
In fact, South Africa has increased its projections for a bumper corn crop — the biggest since 1981. That country is anticipating 14.65 million tons to be harvested this year. But what does that mean for American corn growers?
“The really big demand for the corn is going to come from exports. Corn producers have seen increasing global corn stocks for the past couple of years,” Bekkerman said. “Producers seem to be a bit reluctant to reduce their plantings, even with lower prices. We thought we’d see that this year, because typically the ratio of soybean prices to corn prices is about 2.5. Anything above 2.5, you’ll see soybean plantings go up and anytime it’s below 2.5, corn plantings go up. Earlier this year, the ratio was above 2.5, then 2.8 then 2.75, returning to 2.5, which suggests we won’t see as big of a transition to soybean acres as we first thought.”
PRICES TO REMAIN STEADY
Bekkerman said he expects corn prices to remain steady. He doesn’t anticipate they will increase given the level of global corn stocks, but he also doesn’t think they’ll decline. To illustrate how much U.S. corn stocks have skyrocketed, the U.S. Department of Agriculture’s World Agriculture Supply and Demand Estimates report issued at the beginning of the 2013-2014 marketing year pegged U.S. corn stocks at 1.855 billion bushels. The latest report has U.S. corn stocks calculated at 2.403 billion bushels.
“The tough part about those corn piles on the ground is that quality becomes an issue, especially if they’re wet, so we’ll see a fair amount of that corn used by livestock producers,” he said. “They’re pretty happy with that for an input cost.”
Iowa State University Extension economist Chad Hart has indicated that the U.S.’s top three agricultural trade partners — Canada, Mexico and China — have reduced corn production and will have an increased need to import corn. Furthermore, the global demand for meat is rising, which means global partners also need more livestock feed, Hart said. ❖
— Danley-Greiner has spent more than 20 years as a journalist covering local, state and national issues important to agriculture and those dedicated to farming.