Cattle feeders and other corn end-users should consider stockpiling one to two years of grain ahead of any price reversal for the crop, advises Bryan Doherty, Stewart-Peterson.
“Moving into the growing season, you look at something like corn trading in that, let’s say, $3.75 on the board, $3.80 on new crop, a little bit lower for old crop,” Doherty points out on the “AgDay” Agribusiness Update. “Look at those price levels and say, ‘How much downside do we really have?’ If I’m a cattle feeder or a dairy, 50 cents, 75 cents, why not scale in? Start buying it now, taking ownership of the inventory, and then if prices go down, take additional inventory. Look out one or two years because at some point, something comes along and changes that whole supply picture. You want to take advantage of low prices when you can. That’s a value proposition.”
There not much end-user competition for corn at this point simply because of ample inventories, but that doesn’t mean livestock producers should play the waiting game.
“The market’s at a just-in-time inventory,” Doherty explains. “If you bought ahead two months ago or three months ago, that was a mistake because it’s cheaper. So it’s a psychological issue. But at some level, you’ve got to recognize you’re in the lower half or third of the market for the year. You need to start stepping into this and buying some inventory.”