Feed-grain prices fluctuate, but tight corn and soybean supplies mean this year’s grain prices could produce an even bumpier ride than usual.
The projected corn carryover is about 901 million bushels. Anytime those stocks drop below 1 billion bushels, supplies are considered tight, says Melvin Brees, University of Missouri agricultural economist. Soybean levels are no better at 125 million bushels, which is near pipeline levels.
Planting expectations for the coming crop year indicate the market is encouraging more corn acres to be planted than soybeans. That might keep corn prices reasonable next fall and winter, but it will do little to help stabilize soybean meal prices. “Right now nobody is expecting much better than trend-line yields, which (nationally) is about 39 to 40 bushels per acre for soybeans and 141 to 142 bushels per acre for corn,” says Brees.
With trend-line yields, Bob Wisner, Iowa State University agricultural economist, would expect corn to average about $2.30 per bushel, with soybean meal averaging $159 a ton. If yields were to improve to 144 bushels an acre for corn, and 41 bushels for soybeans, Wisner would expect corn prices to be about $2.15 per bushel, with meal around $151 per ton.
Weather is the big question mark. “The danger of drought is still very high,” says Brees. “It’s still dry in some parts of the Corn Belt – Missouri, Kansas, Nebraska and Iowa are all pretty dry. Of course, that could change this spring.”
If a drought occurs, prices will certainly shoot higher. If corn yields drop to 134 bushels per acre, Wisner believes the price would rise to $2.80 per bushel. If soybean yields decline to 34 bushels an acre, meal price could average $248 per ton.
“Pork producers should look at getting some forward-price coverage, especially through the summer months,” says Wisner. “However, some processors are afraid of the basis risk and aren’t willing to go very far ahead on contracts.”
Picking the times to buy corn will be important, too. Wisner expects corn prices to rise through May, depending on U.S. weather and Chinese exports.
Demand factors look to be strong for corn and soybeans. The continued growth in ethanol use is raising corn demand, says Wisner. With modest gains in pork, poultry and dairy production, some increase in feed use is expected, even with a decline in beef numbers.
“The key development will be export sales,” says Wisner. “With corn, the big question is when will China re-enter the export market. If China stays out, it could raise demand for another 100 million bushels or so, of U.S. corn.”
Competition from other markets could ease soybean and soybean meal prices, especially in the fall.
“South America looks to have another record soybean crop,” says Brees. “There is some uncertainty, but if South America produces a record crop, it will total more than U.S. production and provide stiff competition for U.S. soybeans and bean meal.”
Another factor to watch is what develops with new feed regulations or limitations on animal-based proteins. If fears of bovine spongiform encephalopathy trigger more restrictions, soybean meal demand could increase slightly.
All in all, you can expect grain prices to be higher than in the last few years. Add in the so-so hog-price outlook, and it’s definitely worth some extra time to find the best deal on feed grains. The grain-market’s volatility could leave everyone guessing.