While the beef industry struggled to adjust to $3 per bushel corn for most of last year, prices exploded to over $5 per bushel by January. Volatility in the grain markets is sure to squeeze cattle feeders and limit prices for feeder calves in the coming year.
“There is even more reason to be concerned about corn prices this year,” says Randy Blach, execu-tive vice president of Cattle-Fax. “Prices for other commodities have risen along with corn, increasing competition for what farmers choose to plant.”
Prior to the latest spike in corn prices, Cattle-Fax had projected that corn plantings would decrease by
6 million acres in 2008, down from the 93 million planted in 2007. Now Cattle-Fax says one of the key indic-ators to watch is how prices for other commodities respond. If they stay high, it’s a signal that other grains are ready to compete for planted acreage.
Unprecedented demand for corn, wheat and soybeans is driving the price surge. Export demand is strong and Congress in December increased the ethanol mandate to 15.2 billion gallons from live-stock feed sources like corn by 2012. While the 2007 corn harvest was record-large at just over 13 billion bushels, Cattle-Fax analysts say the need for another near record-large corn crop will pressure margins across the industry.