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Corn Prices Expected to Edge Up, Could Pressure Fed Cattle Bids in 2015

31 October 2014

US - 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 grain marketing economist, the record corn harvest in the US and the recent decline in the price of corn could affect planting decisions by grain farmers heading into 2015.

Dr Mark Welch said: "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.

“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.”

Dr 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 push back on the cattle side as well.”



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