December 21, 2006

 

US grain production outlook best in 20 years

 

 

Grain producers could look forward to a profitable market for several years, but cattle producers must work through some shocks in the market, a Texas Cooperative Extension specialist said.

 

The overall outlook for grain producers was the best in 20 years, said Dr Steve Amosson, Extension economist in Amarillo.

 

With near-record prices for corn and sorghum, producers would be able to lock in profits not only for this year, but also for the next couple of years, he said.

 

Ethanol production has raised corn use 500 million bushels in the last year, Amosson said. This could further go up to another 500 bushels provided all planned ethanol plants come on line.

 

He also emphasised that to meet the proposed goal of producing 15 billion gallons of ethanol, corn acreage would have to increase between 21 to 23 million acres nationwide.

 

Besides, corn, wheat has also been ringing up high prices for producers, though for a different reason, he said. Production throughout the nation and world has been short.

 

Prices of natural gas would either remain stable or fall in the next couple of years, affecting irrigation pumping prices and also fertiliser prices.

 

Though water shortage had prompted some producers to switch to cotton, higher corn prices could bring them back, at least partly, he said.

 

Cattle industry, on the other hand was heading towards heavy losses, especially if producers bought cattle before the corn price run-up, he noted. For every 10-cent increase in corn prices, calf prices would fall US$ 1.50 per hundredweight, he substantiated.

 

He also predicted increased use of distiller's grains, a by-product of the ethanol industry in feed rations in order to offset some of the corn currently being fed to cattle.

 

Besides, the industry might move to shorter feeding periods to reduce feed bills.