2004 Corn Supply and a Possible Bargain Buy
Dr. E. Bruce Godfrey
USU Extension Economist
Most dairymen recognize that feed generally represents the largest single cost of producing milk. Corn is one of the major grains used in many dairy rations. It is also the primary grain grown in the United States. For example, in 2003 more than 10 billion bushels of corn was harvested. This is more than double the combined total bushels of wheat, oats, barley, sorghum, and soybeans harvested in the same year. The dominance of corn as a feed grain and the resultant price for corn essentially dictate the prices that exist for all of the other feed grains. As a result, corn supply and demand are the key factors that must be considered by a dairyman who will be buying any kind of feed grain.
USDA is projecting that a record corn crop will be harvested in 2004. This is the result of completing the planting of corn earlier than any other year on record and a favorable summer growing season. As a result record setting yields are being projected. There is some uncertainty with this projection because late season cool weather may reduce yields, but most projections I have read suggest that production will likely be at an all time high. Normally, this would be good news for livestock producers because it would cause grain prices to be low. However, it should be noted that use of corn is also at record levels and the stocks of corn on hand are relatively low. This suggests that corn prices will be supported by high demand.
Dr. Robert Wisner from Iowa State University, one of the nation�s leading grain market experts, gave a seminar at USU in mid-August and made an interesting observation that may be especially helpful to dairymen in this area. He noted that if the record projected yields occur (he supported these projections), there will not be enough storage to handle it all. As a result, it is likely that much of the corn that is harvested will be stored, in the short run, on the ground and that harvest season prices will be lower than they would have been if sufficient storage was available. He expected the price of corn to be about $1.85 per bushel at harvest time in the corn production areas in the Midwest. Dairymen in Utah can therefore expect corn prices to be about $2.25 per bushel here at harvest time when the positive basis (historic basis data for Utah are found at the following web site http://extension.usu.edu/agribusiness/basis/) is added to the prices that are expected to exist in the Midwest. These low prices are not expected to continue for a long period of time because there will be returns from storage (increasing stocks to meet projected strong demands). Therefore, dairy producers who expect to purchase corn in the coming year and have storage capacity should seriously consider buying corn this fall during the harvest season when corn prices will likely be a relative bargain.