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CattleFax at NCBA: Be protected against corn price jumps

David Cooper Published on 22 February 2011

Cattlemen may not like how enormous amounts of feed production goes into ethanol plants, but it’s a trend that isn’t slowing down. Mike Murphy of CattleFax said within one to three years the amount of corn used for ethanol will exceed the amount of corn used toward food production.

Murphy addressed feedstuff economics and forecasts during his presentation at the CattleFax 2011 Outlook Seminar held in Denver, Colorado during the National Cattlemen’s Beef Association.

“From a cow-calf perspective and stocker perspective, we’ve got to recognize those times of the year corn becomes more volatile and affects the value of our animals, as well. We need to remove this risk as much as possible in the future.”

The USDA revised its corn crop estimates in January, causing another jump in corn prices. “As we look at the market with what we know today, the stocks to use are now at 5 percent and go up to 6 or 7 percent. There’s more upside today to the market.”

From a price standpoint, Murphy said $7.50/bu is where the top market should hit, and late spring is when the highs occur. Murphy encouraged producers to take some coverage if you put cattle on feed between February and summer to eliminate price risks.

The Cattle Fax estimate is for 92 to 93 million acres of U.S. planted corn, which should enough to secure the necessary acres for all ethanol and feed – the margins on ethanol production being the key determining factor.

“If everything goes right this summer, you could see corn get back here for a harvest low -- close to 5 dollars a bushel, $4.75 in that target area. That’s not likely to happen unless we get through the pollination season in good hands. So expect that type of pullback in the market to be very seasonal with your true harvest low sometime in September or October.”

Murphy said the odds are contacts in July and September will show more of an upside potential, so producers need to buy the acres and have the right growing season. end_mark

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