Maybe there is a price ceiling to corn after all...at least for a moment.
Despite the fact last Thursday's monthly USDA Crop Production trimmed estimated corn production by 1% compared to a month earlier at 10.7 billion bu., futures prices actually moved lower for the remainder of the week. Ending stocks were also estimated 60 million bu. lower at 935 million bu.
Depending on what analysts you listen to, reasons ranged from profit-taking ahead of the weekend, to wonderments about whether demand can be sustained at higher corn prices, to the good old- fashioned notion of digesting the news before acting on it.
Overall though, Brian Roe, Ohio State University (OSU) associate professor of ag economics, points out in the recent OSU Beef Team newsletter, "Prices for corn and soybean meal have rallied over the past two months to the point where 2007 corn prices are projected to be in the top 5% of prices observed in the past 15 years. 2007 soybean meal prices are projected to be in the top 30% of prices observed over that same time period.
"Today's four-weight calves will eat upwards of 30 bu. of corn on winter backgrounding rations that would take them to 750 lbs. and then another 60 bu. of corn on the feedlot until slaughter. It logically follows that, just as car prices decline in the face of higher gas prices, so feeder-cattle prices will decline in the face of higher feed prices.
"Furthermore, when gas prices spike, vehicles requiring the most gas face the most downward price pressure. The same is true for cattle, as the lightweight feeders -- the cattle with the most eating in front of them -- will face the greatest downward price pressure," Roe writes.
As an example, Roe cites 1996 when corn prices averaged more than $4/bu. At the time, lightweight calves (300-400 lbs.) brought a price only 10% higher than that of feeders (700-800 lbs.). He explains the price premium for calves at that weight is usually about 30% over the feeders.
You can find more of Roe's insights at: fairfield.osu.edu/ag/beef/beef.html.
For the week ending Nov. 5, according to National Ag Statistics Service (NASS).
- Corn -- 81% is harvested, which is 7% behind last year and 1% behind the five-year average.
- Soybeans -- Growers have harvested 90% of the crop, compared to 95% at this time last year and 91% for the average. As was the case with corn, soybean harvest trailed a week or more behind normal in the eastern Corn Belt due to persistent precipitation.
- Winter Wheat -- 94% of the crop is sown, 1% less than the same time last year but the same as normal. 82% of the crop has emerged, 1% behind last year and the normal pace. 59% is rated good or excellent, compared to 57% at the same time last year.
- Sorghum -- 95% is mature, compared to 96% last year but the same as average. Though the crop was at or ahead of normal in most states, Kansas -- the largest producing state -- trailed slightly behind normal. 70% has been harvested, compared to 78% last year and 76% for average.