December 23, 2002 | By: Laura Skillman
LOUISVILLE, Ky.

Grain producers in Kentucky suffered through a poor production year while prices failed to increase as much as hoped.

The lackluster increase in corn prices is likely attributed to three factors, said Steve Riggins, a grain marketing specialist with the University of Kentucky College of Agriculture.

Expectations play a key role in pricing, he said. The market is anticipating more corn acres in 2003 than in 2002, probably 1 to 3 million acres. Also, expectations are that there are not going to be two bad weather years in a row and yields will move back to 140-bushels per acre or better.

A third factor is consumption. Corn use, after seven years of increases in total consumption, is starting to turn down.

“So, we are looking at more acres and trend yield or better yields,” Riggins said. “We are looking at a rebound of production in the coming year at the same time looking for a slowdown in consumption in this year.”

Riggins’ comments came during a news conference held in conjunction with the Kentucky Farm Bureau Federation meeting held recently in Louisville.

Sixty percent of corn use is to produce meat. Demand for grain is a derived demand, he said, based on the consumption of meat. Per capita consumption of meat peaked in 1999 but is holding steady and the population is still growing. Also, the cattle cycle is heading toward an expansion phase. That all bodes well, Riggins said, but the problem now is simply there are not enough cows out there at the right age to cause corn needed for feed to increase.

The Jan. 10, 2003, U.S. Department of Agriculture report will be an important one, Riggins said, because it will show how much corn was left on Dec. 1 and that will define use for the first quarter of the 2002-2003 fiscal year.

“It is important to see if feed numbers are on track,” he said.

Carryover corn supplies are expected to be tight and small by historical standards. Traditionally, as stocks decline prices go up. But competition from China and from feed wheat grown by countries in the former Soviet Union has muted price increases.

“Indeed the global village has arrived in the agriculture community,” Riggins said.

The USDA is predicting corn prices to average between $2.20 to $2.60 per bushel. Soybean production is expected to be unchanged in 2003. Robust demand for U.S. soybeans by China and a projected tight stocks-to-use ratio have provided some price strength for soybeans.

There are some signs that China’s purchases may be slowing, Riggins said. But the primary reason soybeans have had difficulty reaching $6 a bushel is because of prospects of increased plantings and record large production in South America.

Wheat acres are up this year after six years of reductions, Riggins said. Wheat acres dropped as a result of the1996 farm bill, which reduced price support levels on the crop. The new farm bill is more favorable to wheat and market prices also have increased, helping spur the increase in acres.

However, demand for U.S. wheat has also been shrinking. So although stocks are low, prices are still cheap.

“Wheat is cheap with low stocks because nobody wants what we have,” Riggins said.

 

Contact: 

Steve Riggins, 859-257-7256