Analyst says ethanol rush is over, corn may drop to $3.25

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Livestock producers are likely to see shrinking feed costs ahead with one market analyst forecasting lower corn prices as ethanol demand will be “flat-lining” into 2022.

Corn Close Dan Basse, AgResource Company, told the good news to cattle producers at the eighth annual Feeding Quality Forum at the end of August. After grain producers saw higher profits last year, Basse says it’s time for livestock producers to have their turn.

“You have been fighting ethanol for corn these past six or seven years, but the biofuel rush is over, and the aftereffects have reshaped the market,” Basse said.

The swing in ag markets leads Basse to forecast $4 corn this fall and a range from $3.25 to $6 over the next decade. Low feed costs will boost producer margins and may finally help feeders dig themselves out of negative margins which USDA Market News reporter Corbitt Walls says have steadily been between -$75 and -$200 per head for nearly a full calendar year.

More affordable feed paired with falling beef production is expected to lift cattle prices. Basse expects cash cattle prices to push higher to reach between $134 and $138 per hundredweight in the fourth quarter of 2013 and higher prices aren’t unreasonable.

While the lowered beef production figures will test the retail market, Basse says a shift in U.S. oil production taking it from the leading net importer of energy to the leading exporter within seven years will reduce oil prices below $70 per barrel.

“That will put more discretionary income in consumer pockets, and they will buy more beef,” Basse said. 

Lower corn prices sinking below production costs will encourage crop producers to shift land back to grazing pastures.

“We may see 3 to 5 million acres go back into pasture in this country,” as farmland prices undergo a 5% to 35% downward price correction.

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NE  |  September, 10, 2013 at 07:07 AM

Sounds like a Cheap Corn Coalition wish list.

Ohio  |  September, 10, 2013 at 07:30 AM

Ohio below $80 will never happen. Oil lower than $90 for a long period is highly unlikely.

September, 10, 2013 at 09:47 AM

Even if it is true does he think that we will continue to raise corn at $3.25/bu. The response will be a dramatic drop in corn production. It wasn't that long ago corn production was 55 million acres and only 6 billion bushel, does he want that?

IL  |  September, 10, 2013 at 02:06 PM

Pretty sure people were raise corn when it was $1-$2. If all those get rich quick so called farmers wouldn't of caused such inflation in the seed, fert, land, and equipment markets we would of never made it to $7 in the first place. Feel sorry for the poor saps that payed $300+ acre for land rent.

Cy Byrd    
Mexico  |  September, 10, 2013 at 05:01 PM

DH Network, Your headline is very misleading. All this might happen if Mr. Basse's dominos all line up in a row and fall as he ispredicting. It is very unlikely that this will happen. I'm not selling the farm yet. Cy

Matthew Leonard    
September, 10, 2013 at 08:59 PM

He also was predicting $10 corn last year

georgia  |  September, 12, 2013 at 04:02 PM

The Saudis cannot let Brent crude be lower than $100/barrel or there will be a revolt. Lower corn prices will mean more exports and more ethanol and n-butanol production!

Joanne Ivancic    
Advanced Biofuels USA  |  September, 12, 2013 at 06:18 PM

So the consumers will not get a break in the price of beef or chicken, etc. which was blamed on the high price of corn due to the market for ethanol. Now it will just be blamed on----"boosted" producer margins? Meaning that now the corn growers make less money, and the livestock producers make more because the prices for consumers will stay the same. I'm sure that it will be, but I've not figured out how, yet, that is that going to be blamed on biofuels.

Joanne Ivancic    
Advanced Biofuels USA  |  September, 12, 2013 at 06:26 PM

Oh, I see that GRESCH did explain how continued high meat prices will be blamed on biofuels--and on feeding the hungry in other parts of the world. While the price of corn receeds below production costs--and the taxpayers will go back to making up the difference in subsidies.

Nebraska  |  December, 30, 2013 at 12:18 PM

Well don't hold your breath on that 3-5 million acres going back to pasture. It takes years and in many cases out west decades - yep decades and money to establish good pasture. It will take multiple years of money losing grains to convince people that spent $100,000's of thousands on dirt work, irrigation rigs and equipment to put land back to grass if ever. This should surprise no one, government gives and they take away. The ethanol requirements were implemented and increased, now the government takes away the incentive thus pulling the rug out. They do it every time. When are we going to learn our lesson on government subsidies? Get the government out of farming and we all would be better off.

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