Large Corn Crop Still Expected, Despite Lower Yields

– Dr. Kenny Burdine, Extension Professor, Livestock Marketing, University of Kentucky

As a livestock economist, I don’t write about grain markets very often. And when I do it is typically after a major event, or significant report, that has implications for the corn market. I always pay attention to Prospective Plantings in the spring and Acreage in the summer as they provide estimates of the number of corn acres to be harvested. And I pay even more attention to Crop Production reports starting in August as they provide USDA’s estimates on yields and can give a better picture of how large the corn crop will actually be. The yields estimated in August are based on farmer surveys and satellite models, while the September estimates incorporate objective yield field plot data.

The September estimates came out last Tuesday (September 12) and did provide a bit of a surprise. The consensus seemed to be that yield would likely be lowered from the August estimate due to weather conditions in much of the corn belt. That proved to be true as yield projections were lowered by 1.3 bushels per acre. However, I don’t think many were expecting this to offset by an 800 thousand acre increase in estimated harvested acres. The net effect was that expected corn production was virtually unchanged from August. Consequently, the estimated marketing year farm price for the 2023/2024 marketing year was also unchanged at $4.90 per bushel.

More significant than these estimates themselves is the perspective they provide on the overall feed market. Corn tends to be the driver and has implications for all feeds. Feed prices have certainly come down in recent months and that is probably best illustrated by examining the most recent Kansas State Focus on Feedlots report above. Note that the projected cost of gain for cattle being placed in July was significantly lower than the cost of gain for July closeouts. However, feed prices remain relatively high from a historical perspective and the September estimates of the corn crop suggest feed prices are likely to stay in the current range.

Holding everything else constant, higher corn prices lead to lower feeder cattle prices as greater cost of gain decreases the value of cattle placed into feeding programs. However, higher feed prices also result in higher value of gain as feedlots are incentivized to place heavier cattle. The September report suggests that opportunities to profitability add gain to calves and sell heavier cattle are likely to remain in the coming months. This will be especially true for cow-calf and growing operations that have potential to add gain through forage or alternative feeds. Producers should continue to be diligent about evaluating costs and market conditions as they make decisions about post-weaning and backgrounding programs.