Few people were anticipating the Dec. 1 corn stocks number, as indicated by the 50¢/bu. decline in the nearby months following the report. As is usually the case, the actual number is not nearly as important as how it compares to what was expected.
The December carryover is actually the smallest December corn stocks number in five years. This isn’t exactly a bullish number; even though the crop estimate was raised only marginally, most experts were expecting it to be reduced.
Corn usage numbers were lower than expected. That shouldn’t be that big of a surprise; after all, people are getting pretty adept at feeding less corn.
We’re likely to see a similar situation with hay. That’s the result of a combination of some fall moisture that improved fall grazing prospects, a mild winter thus far throughout the Northern Plains, and people finding creative ways to reduce their dependence on hay. Everyone expects hay prices to soften but, with hay land moving into grain production, most producers have concluded that purchased hay, like corn, is no longer a viable alternative – at least at the percent of the diet that it used to enjoy. And, if the drought in Texas and Oklahoma persists this summer, few producers will have the stamina to feed such high-priced hay again.
Less purchased hay and corn being fed to cattle is a trend that shows no signs of abating. Most experts say USDA has underestimated corn-usage levels, and they may be correct. However, from an anecdotal standpoint, I can’t find anyone who is feeding corn at the levels they once were.
Not only are we placing cattle at heavier weights, which means less time on a concentrate ration, but everything possible is being done at the feedyard to minimize the amount of corn being fed. We’re still the world’s low-cost producer of corn-fed beef – the product the world most prefers. But with the rise in ethanol demand, we’re facing more risk and higher prices with higher percentages of corn in the ration.
The message has been sent loud and clear – continue to reduce the size of the industry, or reduce the amount of corn being fed. I think we’re learning the industry will be even more responsive to these signals than it thought.