Editor's Note: The following article was written by Ching Lee, Assistant Editor of Ag Alert. Ag Alert is the California Farm Bureau Federations' weekly newspaper.
Prospects for a bumper U.S. corn crop this fall have brightened the outlook for farmers who raise livestock and depend on the commodity for feed.
The latest U.S. Department of Agriculture forecast, released last week, projected corn production at 13.8 billion bushels, up 28 percent from the drought-stricken 2012 crop. If realized, this would be a new record output for U.S. farmers.
At the same time, USDA predicted that 12.7 billion bushels of this year's crop will be used—including for feed, food, fuel, seed and export—up from 11.2 billion bushels last year. Feed usage alone is projected to be about 15 percent higher than last year. This puts projected ending stocks at more than 1.8 billion bushels, compared to 719 million bushels in 2012.
Joel Karlin, commodity manager and market analyst for Western Milling in Goshen, said while USDA downgraded yield estimates slightly from its July forecast, sending corn prices higher recently, he thinks the current projections are too low.
"Not only do I think the upcoming crop is larger, but I also think USDA's estimates for export demand and also for domestic feed demand are somewhat optimistic, perhaps unrealistically so," he said.
He noted that despite a wet spring that delayed planting this year, summer growing conditions in the Corn Belt have been favorable, promising a bountiful harvest. Other major grain-producing regions of the world also enjoyed a good growing season, which means more export competition for the United States, he added.
And with the nation's low cattle numbers and continuing dairy herd liquidations, Karlin said, "we don't have the animal numbers out there to eat that corn." In addition, livestock producers are using more substitute feed products such as distillers grains, and that could further lower demand for corn, he said.
Tulare County dairy farmer Tom Barcellos said he is not too concerned about the short-term spike in corn prices, as markets reacted to the lower-than-expected corn yield forecast.
"It's still going to be one of the largest crops on record, which is beneficial to the dairy industry looking forward," he said.
Corn prices are expected to decline from the 2012 marketing-average price of $6.95 per bushel to a projected $4.90 per bushel this year, said Todd Davis, an economist with the American Farm Bureau Federation.