With the market softening, Barcellos said he recently forward-contracted about 30 percent of his future corn needs "at a very favorable price" and may now lock in an additional 15 percent. Barcellos said while he anticipates corn prices will drop even further, he warned that "we're not done yet; (the crop) still has to finish."
There's the risk that the late-planted crop, which will also be harvested later, might be met with rain and early frost, which could affect yields. But for now, he said his farmer friends in the Midwest "are pretty optimistic about their crop."
For California dairy farmers, who have been hit hard by rising feed costs, cheaper corn will help those who are still in business get back on more stable financial footing, Barcellos said, but he lamented that it won't help those who are already on the verge of closing their doors.
With feed prices moderating, producers will be able to "maintain a good, strong herd with solid production instead of trying to cut corners to keep going," he said. While this could boost milk production, potentially leading to lower milk prices, Barcellos said any increase in the state's milk supply will also be tempered by more dairies exiting the business.
Dairies are not the only agricultural business hurt by high corn prices.
Bill Brandenberg, manager of Meloland Cattle Co., a feedlot operation in the Imperial Valley, said the entire U.S. livestock feeding sector has been losing money for the last 16 months, as corn prices reached record highs last summer. He said his operation will continue to stay in the red for most of 2013 and possibly break even by year's end, noting that producers won't see the full effect of lower corn prices until October, when the crop will be harvested.
Unlike other, more traditional feedlot operations that buy yearling cattle that have been raised on grass and come in at heavier weights, Meloland buys mostly 4-month-old Holstein calves that are then fed for about a year. Brandenberg said he had not anticipated last year's record-high corn prices because U.S. farmers had planted near-record acreage, but then the drought took its toll on the crop. He had bought enough corn through the end of fall and was on the market after that.
"So these cattle have got a lot higher cost than what we originally projected, and so we're losing money right now," he said.
But with corn prices dropping, Brandenberg said there's more of an incentive for him to buy more cattle and "stock back up again" if he knows he can contract them at a profit.