While the decreasing price of corn has sparked concern throughout the agriculture industry, the resulting low feed prices do offer several benefits to livestock producers and the dairy industry. Low feed prices can help to soften the blow from the continued decrease in global price and demand for milk. Many factors seem to demonstrate that the new long-term “normal” for corn prices may be $3.50 per bushel, and Cody Heller, CEO of Central Wisconsin Ag Services (CWAS), has offered his insight into the cause of the record prices seen in 2012 and why it will be difficult for the markets to sustain prices that high over the next five to ten years.
According to Heller’s report, past high prices and several good yields have led to global stocks of corn, soybeans, and wheat reaching record highs. The changing market for ethanol, however, may seriously impact the resulting demand for those record high supplies. According to USDA, we will not see an increased demand for US corn for ethanol higher than 0-1% from 2016 to 2025. On the global side, China is in a well-documented recession, and the country is forecast to import its lowest level of corn since 2009.
Heller says in order for corn prices to move higher, something would have to happen on the supply side. “This will come from a drought, governmental controls, or a stark increase in global growth and demand to reset global supply,” he says. “The catch-22 here is due to better genetics and better technology, corn yields (with the exception of 2012) have been growing at a pace of about 2-3 bu. per acre annually.”