Over the past year, cattle producers at every level of production have enjoyed a favorable market environment. Demand has kept up with supplies bringing higher prices for all classes of cattle, and inexpensive grain has kept feedyard production costs low while boosting the value of calves and yearlings.

Projections suggesting smaller cattle inventories and lower beef production over the next few years indicate a continuation of high market prices. The market carries a degree of risk, however, with possible threats from several directions. One is uncertainty over whether beef demand can hold up in the face of continued negative publicity regarding animal-health and food-safety issues. Another potential threat is the possibility of higher grain prices as we enter a new growing season.

Planted corn acreage is down, and a wet spring has delayed planting in some areas. But grain exports have declined and carryover from the old crop appears adequate. So how much price risk do grain users face through the rest of 2001?

In its April 10, 2001, Supply and Demand report, the U.S. Department of Agriculture boosted its projection of U.S. 2000-01 ending stocks for corn by 10 million bushels from its previous report. The number reflected declines in corn exports and food use and an increase in domestic feed use.

Some early indicators suggest, how-ever, that this year's corn crop could be significantly smaller than last year's. USDA's Prospective Planting Report, released at the end of March, predicts a 2.9 million acre reduction in corn acreage compared with last year.

Delayed plantings in some areas also lead to speculation about a smaller corn crop. Iowa State University economist Robert Wisner notes that unusually late snow melt in Iowa and other states, along with April rains across the Midwest, have caused uneasiness about possible planting delays.

While long delays in planting can negatively affect yields, Dr. Wisner points out that modern equipment allows farmers to make up time quickly once they can get into their fields. He also has studied records from other recent years during which wet spring weather delayed planting. In four of these five years, he says, a wet spring was followed by additional weather problems later in the season that contributed strongly to low yields. Late planting by itself probably did not reduce yields without the help of drought, floods or early frost.

All things considered, the outlook is good for continued abundant grain supplies and low prices. While acreage is down, average or better yields will produce plenty of corn by historical standards. Most production areas begin the season with good soil moisture and carryover stocks are more than adequate to carry grain users through the growing season. There always is a chance, though, that weather problems during the summer could cause volatility in the grain market, producing enough risk on the upside to justify forward pricing or hedging on market lows.