Dillon Feuz
In the Cattle Markets
Corn market risk
The government found more bushels of corn on hand and increased the expected ending 2011 inventory to 730 million bushels (bu.) with the May 11 report. That was an increase of 65 million bu. from trade expectations and an increase of 55 million bu. from the April estimate. For the short term, that has sent corn prices declining for the day.Even though current plantings are lagging behind last year's planting pace and the average for the last five years, the latest "World Agricultural Supply and Demand Estimates" (WASDE) report expects corn planting to be 92.2 million acres, up 4 million acres from last year.
Given that Texas has been on fire this spring, the upper Midwest has been under water and now we are daily flooding acres along the Mississippi, I wonder from where these extra acres will come. It would seem to me that there is still a potential to be short of corn with this new crop.
I would advise corn users to take advantage of short-term weakness in the corn market to get some corn purchased. I would also closely watch the plantings and corn crop conditions for this year's crop. If farmers don't get 92.2 million acres planted — and even if they do and it is late and therefore yield potential is reduced — there could once again be a very tight corn supply to meet ethanol mandates, feeding needs and import demand.
Since March, the December corn contract has traded as low as $5.50 per bu. and as high as $6.80 per bu. That volatility is likely to continue into the summer and early fall as it appears we will have a later-planted crop that could be at risk of early frost damage.
With a $1-per-bu. swing possible in corn prices, feeder-cattle prices could also be very volatile. Calf prices could change more than $10 per hundredweight (cwt.), and yearling prices could change $5-$8 per cwt., depending on the weight of the yearling. It appears we can count on more volatility in prices for the coming year; but, then, that is probably old news for most of you.
