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Spearman: Energy, commodity prices impact cattle market across U.S., globally

by Wyoming Livestock Roundup

San Diego, Calif. – As energy prices plummeted this year and the profitability of crop prices has been squeezed, CattleFax’s Chad Spearman noted that the same trend is expected over the next few years.

“The question we have to ask ourselves about is weather,” he said. “The key as we look at corn, soybeans and wheat is we have ample supplies coming into this year, and without a major crop production issue, that is going to remain the case and keep pressure on prices through 2016 and into the next year.”


A key marker when looking at prices going forward is the stocks-to-use ratio.

“Stocks-to-use measures total usage relative to the ending stocks at the end of the year is presented on a percentage basis,” Spearman said.

He continued, “Corn stocks-to-use levels are just on top of 25 percent, and they are expected to be flat compared to last year but still elevated compared to tight levels of 2008-12.”

Going back to 2012, stocks-to-use for U.S. corn dropped below six percent resulting in record high corn prices. As stocks-to-use levels are low, prices are high, he explained.

“Since we have moved past that period, at least over the last two years, we have had stocks-to-use levels maintaining above the 12 percent level,” Spearman said.

Spearman added that, through the upcoming year, stocks-to-use ratios will range from 11 to 13 percent.

“That will keep major resistance for stocks of corn around four dollars a bushel and maintain a risk factor of $3.35 to $3.45 going into the spring,” he continued. “When we consider prices in the longer term, trends remain lower. Supplies are ample, so we are going to see that weigh on prices.”

Around the world, the U.S., Argentina, Brazil and Ukraine are the only major corn producers, meaning competition around the world is somewhat limited. However, Spearman also noted that dried corn isn’t as significant a concern as other commodities. Dried corn exports make up a very small portion of the overall crop sales in the U.S.

“We export a lot of things that are derived from corn, but only about 15 percent of the corn crop is dried corn,” he explained. “Cheaper corn prices outside of the U.S. are going to be a limiting factor, though.”

For farmers, increased supply will be a challenge, but livestock producers and feeders will see some relief.

“Feed costs will come down substantially, but we have to separate these three markets when we look at a global economy,” Spearman added.

Protein and energy

“We are looking at cheaper protein and energy feed costs in 2016,” Spearman summarized. “That pressure will continue to weigh on hay prices.”

After 2012, U.S. hay production rebounded sharply, and hay stocks also rebounded over the last year.

“We are seeing those prices come down substantially, and we expect that will be supportive in the cow/calf sector in terms of costs,” he said. “Other hay prices and alfalfa hay prices are expected to decline six and 16 percent, respectively, for the current marketing year ending in April.”

Influence of ethanol

An additional complicating factor in corn markets is the use of corn to make ethanol.

“When we look at the corn market and the changes it has undergone since 2005, the ethanol industry has become established and is not going anywhere,” Spearman said. “We have 35 to 40 percent of the corn market that is tied to energy markets.”

As energy prices have declined, support of the industry through ethanol production should not be expected.

Market forecast

“Corn prices will stay at $3.35 to $3.45, up to $4.10 on the high end in the spring.”

With 89.5 million acres of corn expected to be planted in the 2016-17 marketing year, and forecasted yields of 167 bushels per acre, Spearman commented that the resulting supply of corn is steady or only slightly higher than last year’s.

“We do expect usage to grow, especially as supported by livestock production,” he said. “Without a major production issue, we will be limited to a little above four dollars for corn prices.”

Spearman addressed attendees of the 2016 National Cattlemen’s Beef Association Cattle Industry Convention and Trade Show, held in San Diego, Calif. at the end of January.

Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at

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