Above chart shows a drop from $6.50 to $5.50 is this bad for the corn farmer?
Last years crop was reduced by bad weather driving up the prices. With high prices some users reduce the amount of corn they purchase. Livestock feeders have been losing money as sale prices of market animals have not increased in relationship to the corn expense in their feed. Ethanol plants have reduced production. If the corn users are not covering expenses they go out of business or reduce production. Demand begins to fall. Consider what the corn producer needs. If he decides his cost of production is $1000 per acre he needs 220 bu at $4.54, 200 bu at $5.00, 180 bu. at $5.50, 160 bu. at $6.25, or 140 bu. at $7.14. I would rather produce 220 bu. per acre with great weather than get $7.14 with poor weather. I want corn users to make money, who doesn't want to keep their customers happy. I know that the Beef herds are as small as ever and they have a challenge to rebuild. High costs only will delay that rebuilding and the longer corn stays high the fewer corn bushels feed.
So what is the price in December going to be? That depends greatly on the weather conditions this summer. Some are talking about the return of $4.00 corn. I think the demand has not fallen that far and with great production we can get our users back. If oil prices stay high there would be an opportunity to increase the blend of ethanol in gasoline, exports would increase, and feed usage could begin to build. My concerns are more that although the soil moisture has began to rebuild, it still has a way to go. Corn has been taking over cotton acres and those acres are subject to high temperatures that may limit yields on some years.
$5.50 prices are not bad after all. Don't pray for high prices because they come with a real price.
How are we going to feed the world if our grain is expensive? Pray for good weather and a fair price.
Serving together, Dean
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