Bruce Blythe, Business Editor
13 June 2011 The government’s latest crops outlook brought unwelcome news for Mike Engler, a Texas feedlot operator who’s watched profits evaporate in recent months as corn prices soared to records and the cattle market slumped. There’s no apparent end in sight for tight corn supplies and high feed costs for Engler and other beef, pork and dairy industries, based on the U.S. Department of Agriculture’s monthly Supply and Demand update June 9: http://bit.ly/jScNnT. A wet, cold spring delayed fieldwork in parts of the Midwest, prompting the USDA to cut estimated corn plantings 1.6 percent from a previous forecast, to 90.7 million acres. More troubling for livestock feeders, the USDA slashed its forecast for corn stockpiles near the end of the 2012 summer by 23 percent from an earlier projection. Supplies are already expected to reach a 15-year low at the end of this summer. “The report was alarming,” said Engler, who’s president of Amarillo-based Cactus Feeders, which has capacity for about 520,000 cattle at 10 locations in Texas and Kansas. “There’s hardly enough corn to go around this year.” Corn futures in Chicago rose to all-time highs for two consecutive days, coming just shy of the $8 mark, as the USDA data fueled supply concern. In trading June 10, July corn futures rose 1 ½ cents to settle at $7.87 a bushel, after earlier reaching $7.99 ¾, an all-time high for a closest-to-expiration contract. The USDA’s outlook is “potentially explosive” for corn prices, livestock analysts Steve Meyer and Len Steiner said in a June 10 report. … Despite the reduced acreage outlook, U.S. farmers are still expected to produce a bountiful harvest this year, assuming they can avoid further weather problems. The USDA pegged the 2011 corn crop at 13.2 billion bushels, down 2.3 percent from a previous forecast but up 6 percent from 2010 and a record. But competition for the nation’s corn supply has intensified amid rapid expansion by the ethanol industry, which is challenging livestock feeders as the single-biggest consumer of the grain. … “We’re looking at a wild ride this summer,” Engler said, referring to corn prices. “We could be facing a situation where there’s an actual shortage of corn. We have to ration demand.”
USDA report signals no end in sight for high corn prices
