USA: Corn prices affect wheat, beef, barley

Weather and demand will inject some price volatility into the wheat markets this year, and Montana farmers should enjoy better returns for their grain in 2007, Billings Gazette posted on January 31. Cattle markets may soften a bit from last year.

Whether the Congress writes a new farm bill this year is iffy.

That is the outlook for the agricultural economy for the year, according to George Haynes, an agricultural policy specialist at Montana State University in Bozeman. Haynes was part of a daylong seminar in Billings on Tuesday. Each year, the University of Montana's Bureau of Business and Economic Research tours the state presenting its Montana Economic Outlook Seminar, sponsored by First Interstate Bank.

Prices in 2006

Montana's ag economy benefited from higher prices for grain and cattle in 2006, but that was offset in some areas by drought-stunted production.

Higher prices for wheat worldwide are driven by decreased production, Haynes said, with world stocks at about 119 million tons, the lowest level since 1981-82. Wheat brought an average of $4.51 a bushel in Montana last year, compared with $3.60 for 2005 and 2004.

"Wheat prices are global," Haynes said, and the futures markets are suggesting that wheat prices will be strong this crop year.

July futures for hard red winter wheat on Monday were $4.90 a bushel; March futures for dark northern spring were $4.87. December's were $5.50.

Wheat prices are also being pulled by the demand for corn, which is being bid up by speculative demand for corn for ethanol production.

Montana durum wheat, barley and oats followed a similar pattern as production declines were somewhat offset by higher prices. Barley benefited from corn's run-up.

Feeder calf prices will be off 15 to 20 cents a pound, Haynes said. Cattle feeders are looking for feed substitutes for corn, which was at $2 a bushel in '04 and more than $3 last fall. The spot price for corn Tuesday was $3.76, while March futures were at $4.

Haynes said beef exports to Mexico, Canada, Japan and South Korea are increasing, with most of that from the next-door neighbors. U.S. beef exports for 2006 were pegged at 1.5 billion pounds, but that is only 60 percent of exports in 2003. Because a case of bovine spongiform encephalopathy was discovered in the United States in December 2003, foreign buyers closed their doors. It was just last year that beef exports returned to Japan and South Korea, only to be halted because inspectors found bone chips in shipments.

Haynes said he doubted that exports to Japan and South Korea would recover fully until the United States enacts individual animal identification so that all beef can be traced back to its birth.

"This is a big issue to them," he said. "There is more to it than we see on the surface."

Congress is set to rewrite the farm bill this year, Haynes said, but it is unclear whether it will extend the 2002 version or do a complete rewrite.

He said government payments "are critical to farm profitability" and stabilize the farm economy. Montana farmers received $382 million for farm program crops in 2005, which was 14 percent of farm and ranch income that topped $2.7 billion.

Haynes said farm bill predictions change by the week and right now are "all over the board." The Bush administration is scheduled to release its farm bill ideas today.

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