Cattle producers are nervous about the upcoming year because the possibility of corn prices exceeding $5 a bushel could mean higher prices for livestock feed.
An LSU AgCenter economist recently advised, however, that those fears could be based on some assumptions that may not develop into realities.
“I know there are a lot of mad cattlemen here,” said John Queen, president-elect of the National Cattlemen's Beef Association, in his remarks at the 10th annual Louisiana Cattlemen's Association Convention in Alexandria, La.
Queen told those gathered for the convention that escalating corn prices, higher than $4 a bushel, which have been fed by booming ethanol production, have caused cattle prices to fall $20 to $30 a hundredweight in the past few weeks.
Cattle producers at the convention said they are preparing for higher corn prices.
Robert Joyner, newly elected association president of West Monroe, La., said he expects the market will decline more. Compounding the problem, he said, is a drought that hurt many areas of north Louisiana in 2006.
“I'll be short of hay this year,” he said, adding that he planted winter wheat and oats for forage.
Vermilion Parish producer Calvin LeBouef said several cattle owners in his area have sold out because salt left by Hurricane Rita rendered many pastures unsuitable for grazing.
“The recovery has been a lot slower than I thought,” he said. “I'm sorry to say there's a lot of people not coming back.”
But LeBouef said overall the cattle market should remain strong, with ranchers in drought-stricken areas of Texas eager to rebuild herds.
Dairy farmer Daryl Robertson of St. Helena Parish said escalating feed prices have hurt his operation.
“Our feed is already up $50 a ton,” he said, adding that alternatives to corn-based feed are also in demand. Robertson estimated he would have to get an increase of $1.25 per hundredweight of milk in compensation for the feed price increase, but the price has remained at $14.
“We're still getting paid the same thing for milk that we did 25 years ago,” he said.
David Watson, a Brangus producer from Kentwood, La., said he is getting ready for higher feed prices by planting ryegrass to be harvested, baled and stored. Watson said cattle farmers are being hurt by higher corn prices, but they have the option of grazing their herds, while swine and poultry producers don't have many options for feed.
With somewhat reassuring news, LSU AgCenter economist Kurt Guidry said he would be surprised if corn prices are sustained above the $5 a bushel mark.
“I don't think we can continue the demand pace we are currently on, particularly in the case of feed demand and export demand,” Guidry told cattle producers at the convention. “While increasing demand for corn in ethanol production is likely, extremely high prices tend to adversely impact feed demand and particularly export demand.”
Guidry said it appears that additional acres planted in corn could result in harvest prices of $3 to $3.50, although he said that's still not a good price as far as cattle production is concerned.
He said projections of a corn acreage increase of 8 million to 10 million would help moderate prices, assuming normal weather conditions.
In addition, feed demand is likely to decrease as livestock operations reduce their herds, Guidry said.
“Livestock feeders are losing money at current corn prices, much less if they continue to move higher,” he said. “They can't continue feeding livestock on $5 corn.”
Guidry said feedlots can be expected to start buying larger animals to shorten the time they will have to feed animals.
In addition, there are indications the tremendous expansion of the ethanol market is softening somewhat because of decreasing crude oil prices and higher corn prices, Guidry said. More corn will be needed for new ethanol plants under construction, but the 2007 harvest could exceed the refining demand, he said.
A year ago enthusiasm was high for building numerous ethanol plants — some even in areas far from corn-growing regions, Guidry explained.
But plans for many ethanol facilities were based on $60-a-barrel crude oil and corn prices less than $3, he said. Crude oil prices have fallen to almost $50 recently.
“I think people are starting to get nervous,” he said.
With high corn prices, Guidry said, exports also are likely to decrease and leave more corn on the market, contributing to lower prices. On the other hand, he said, the carryover stock of 750 million bushels from the 2006 crop is one of the tightest in the past 40 years.
The LSU AgCenter economist said volatile corn prices are likely to peak from April until June before the 2007 corn acreage can be fully determined.
In other news at the Cattlemen's Association convention, Queen, a North Carolina producer, said international trade for U.S. beef holds a lot of promise, but several trade problems remain to be solved.
He said after beef sales to Japan resumed last year, “the first day our products sold out.”
Although Queen said Mexico has become “a dream come true” for U.S. beef exports, he pointed out that some other countries in negotiations for U.S. beef are joining in Japan's insistence on accepting only cattle 20 months and younger, instead of the previous limit of 30 months.
Queen also praised Louisiana cattle producers for helping their colleagues in Colorado during a recent snow storm.
“I was proud when they told me Louisiana was the first state to come forward,” Queen said.
Bill Richardson, LSU AgCenter chancellor, told cattle producers the AgCenter is operating with its leanest administrative staff ever. He said he hopes the legislature helps agriculture during the upcoming session.
Richardson said the new livestock show facility at the Dean Lee Research Station south of Alexandria will be able to use a nearby evacuation shelter being built by the state. It could be complete in late 2007 or early 2008, he said, and will provide additional parking and camping space.
“We'll have a first-rate facility there,” Richardson said.
Bob Odom, Louisiana Commissioner of Agriculture and Forestry, said it took a year for regulations to be formulated for disaster funds for hurricanes Rita and Katrina. Regulations should be in place before a storm, he said.
Odom also advised producers that the IRS considers disaster aid as taxable income.