Recent lower prices in corn could translate into fewer planted acres in 2015, potentially putting pressure on bids for beef cattle next year, according to a Texas A&M AgriLife Extension Service economist.
However, Mark Welch, AgriLife Extension grains marketing economist in College Station, told attendees at the recent Brazos Valley Beef and Forage Expo that a lot of things would have to come into play for this situation to develop.
“Over 174 bushels per acre is what we are seeing for corn harvest in the U.S. and that’s an outstanding number,” he said.
Welch said the record corn harvest in the U.S. and the recent decline in the price of corn could affect planting decisions by grain farmers heading into 2015.
“With high prices, farmers all over the world have incentives to increase production. With lower prices, those incentives just aren’t there, for either acres or intensive inputs to push production,” Welch said. “On the demand side, we are still seeing strong export demand and good feed and fuel use. High meat prices offer rewards to increase livestock numbers and feed to heavier weights; that will require more grain used for feed.”
Welch said the implication is that if there are tighter stocks of corn next year, this would have a positive impact on grain prices.
“I don’t anticipate to see this low price we are seeing right now to continue on into 2015,” he said. “We could see the $4.10 to $4.20 a bushel level as we look at harvest prices going into 2015.”
As for the implications to the cattle industry, Welch said a shift higher in corn prices could pressure bids for cattle.
“That would be a knee jerk-response,” he said. “Over time, low grain prices support larger beef supplies and lower cattle prices, generally speaking. The old saying is, ‘cheap grain means cheap cattle.’What we are seeing today is lower grain prices giving a short-term response of higher bids for cattle. If we see higher corn prices, there would be some pushbackon the cattle side as well.”