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Record grain prices expected through 2013

By Jennifer Carrico

MARKETS—AgResource Company president Dan Basse talks about grain and livestock markets to attendees at the Feeding Quality Forum in Grand Island, Neb. recently. (Journal photo by Jennifer Carrico.)

So many farmers and ranchers continue to ask how long the livestock and grain markets will continue to rise.

Dan Basse, president of AgResource Company based in Chicago told attendees at the Feeding Quality Forum in Grand Island, Neb., that he doesn't think it will last forever.

"Cattle feeders have had continued losses over the last six months because of record-high feed costs due to the drought," he said. "If we don't have enough grain, someone is going to be without."

Basse suggests those feeding grain ensure they have enough on hand or contracted to get them through the months of feeding.

"Nearly 4 billion bushels of grain has been lost in the past year in the U.S. because of weather conditions and 200 million metric tons of grain have been lost worldwide in the past year. Crop conditions continue to deteriorate. We need to figure out alternatives because of these losses," he said.

Test weights on corn are expected to be lower than normal, with some as low as 32 pounds per bushel, but closer to 50 pounds per bushel on average. Stalk quality is poor and for the third year in a row the corn yields will be lower than expectations.

"The latest estimate says we will see 120 bushels per acre, but I think that may be quite generous," he said. "If yields are that low, we may see corn prices as high as $10.35 per bushel between June and December 2013 with a likely high between mid-September and mid-November."

For the 2013 corn crop, Basse said 96 to 98 million acres are needed to meet the demand.

U.S. hay production has also suffered because of the drought and is the lowest since 1976 while hay prices are at record highs.

"Chopping corn might be the only way for some producers to provide feed for cattle," he said.

Soybean prices continue to be high as China continues to purchase as much as they can.

Basse said many livestock producers have been buying out their feed six to eight weeks in advance, but some are having a hard time going out further than that.

"The cash corn basis levels are expected to be historically high until the new 2013 crop is available," he added.

On the livestock side, he said as long as beef producers can survive through the next three quarters, there should be an improvement after that.

World beef production is stagnating since cow numbers are down. In some areas of the Midwest, farmers are buying cows to feed corn silage since their corn crop was so poor. He only expects this trend to last short term.

"Revenue insurance is helping out and those farmers want to feed their corn somehow. Buying cows is a good tax investment strategy for them," he said.

The feeder cattle market is expected to stay strong, while expects fed cattle to be $130 per hundred weight in December. Stronger prices are expected for the first quarter of 2013 as well being $133 to $137 per hundred weight.

The U.S. beef export trade continues to stay strong as beef is cheaper to import than grains.

"For those who can manage their forage and feed costs the outlook is bright beyond the second quarter of 2013. If you have the feed, cows and feeder cattle are a good investment in late 2012," he concluded.

Jennifer Carrico can be reached by phone at 515-833-2120, or by email at

Date: 9/17/2012


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