Although there is considerable uncertainty for the 2008 corn crop, favorable weather conditions through September could result in a "respectable" crop.
"There is an interesting dynamic in livestock prices," says Darrel Good, University of Illinois Extension marketing specialist. "As the market expects liquidation and lower production, futures prices have moved sharply higher."
Cattle futures prices range from $105 to $118 for the period from August 2008 through October 2009. He adds, lean hog futures, in live weight equivalents, range from $56.50 to $71.50 for that same period.
"As feed prices moderate somewhat, will these high futures prices actually encourage continued production rather than liquidation similar to the experience of 1995-96?" Good asks.
Good's comments came as he reviewed the trajectory of corn prices, which moved sharply higher in the first half of June as excessive precipitation threatened both acreage and yield. July 2008 futures rallied from about $6 to a high of $7.60, while December 2008 futures moved from $6.25 to a high of $7.915.
"As suggested last week, prices have moderated slightly from those highs as weather conditions have improved," he notes.
The USDA announced that it will conduct follow-up surveys in some states to supplement previous data collected for the June 30 Acreage report.
Good says, "In addition, a more comprehensive survey will be conducted in July with the results to be incorporated into the wide range. Most believe planted acreage will be below that indicated in the March Prospective Plantings report. Others believe that planted acreage will exceed March intentions as producers responded to the sharp price rise following the intentions report in March."
There are also indications that the rate of corn feeding may be on the decline. In May, the number of cattle placed into feedlots with a capacity of 1,000 head or more was 12 percent smaller than placements during May 2007.
"The number of cattle on feed in those lots on June 1 was 4 percent smaller than the number a year earlier," he notes. "There also has been discussion that the last leg up in corn prices will result in renewed liquidation in the hog sector. In addition, wheat has become attractively priced relative to corn for feeding this summer."