Outlook for grain market to be powered by livestock, export demand

Writer: Blair Fannin, 979-845-225, b-fannin@tamu.edu

 

COLLEGE STATION – Future demand for grain in both the export market and U.S. livestock feeding sector should give farmers profitable opportunities in the years ahead, according to a Texas A&M AgriLife Extension Service economist.

A special AgriLife Extension outlook program was recently hosted by the department of agricultural economics at Texas A&M prior to the Texas A&M-Alabama football game. AgriLife Extension economists provided updates on several agricultural commodities.

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Dr. David Anderson, Texas A&M AgriLife Extension Service livestock economist, discusses current trends in the beef cattle market. (Texas A&M AgriLife Extension Service photo by Blair Fannin)

Dr. Mark Welch, AgriLife Extension grains marketing economist, said that through the years there has been amazing growth in grain consumption. That momentum doesn’t appear to be changing, he said.

Dr. Mark Welch, Texas A&M AgriLife Extension Service grains economist, discusses corn consumption at a special outlook program prior to the Texas A&M-Alabama football game in College Station. (Texas A&M AgriLife Extension Service photo by Blair Fannin)

Dr. Mark Welch, Texas A&M AgriLife Extension Service grains economist, discusses corn consumption at a special outlook program prior to the Texas A&M-Alabama football game in College Station. (Texas A&M AgriLife Extension Service photo by Blair Fannin)

Even though biofuel growth has leveled, Welch said the livestock and export markets are poised for expected growth in the coming years. That’s due to a rebound in U.S. cattle inventories at numbers not seen since the 1950s as herd rebuilding will begin once more if drought conditions lift, and the expected growth in China develops.

Overall, Welch said, “things are going to stay exciting” with more demand for corn to help further  livestock feeding and a continued surge in export market demand.

Meanwhile, Dr. John Robinson, AgriLife Extension cotton economist in College Station, said China controls a large surplus of cotton, which is affecting prices for both the short and long term.

He said it’s likely prices will predictability continue a back-and-forth weakness.

“The futures market has already forecasted that,” he said.

He advised producers to watch China. If they begin to import less U.S. cotton and consume their own supplies more, he said there will be 60-cent cotton if China begins unloading its surplus of supplies.

“We may then be looking ahead at a couple of years of low prices,” he said.

Dr. David Anderson, AgriLife Extension livestock economist College Station, said the U.S. beef cattle industry is set for a slow rebuilding process since drought has further delayed herd rebuilding. However, beef consumption and strong export demand signal a continuation of strong beef cattle prices ahead.

Dr. Joe Outlaw, Texas A&M AgriLife Extension Service economist. (Texas A&M AgriLife Extension Service photo by Blair Fannin)

Dr. Joe Outlaw, Texas A&M AgriLife Extension Service economist. (Texas A&M AgriLife Extension Service photo by Blair Fannin)

Dr. John Robinson, Texas A&M AgriLife Extension Service cotton economist.

Dr. John Robinson, Texas A&M AgriLife Extension Service cotton economist. (Texas A&M AgriLife Extension Service photo by Blair Fannin)

But dry weather and lack of forage have prevented many ranchers from retaining replacement heifers and building back herds.

The Texas beef cow inventory is 1 million fewer since the drought started in 2011. Once beef cattle producers can clear the drought hurdle, there are favorable opportunities for the beef cattle market in the future, Anderson said.

“Calf prices are at a profitable level, but you can’t expand due to drought,” he said.

Dr. Joe Outlaw, co-director of the Agricultural and Food Policy Center at Texas A&M and Extension economist, provided a farm program update. He said both versions of a new Farm Bill by the U.S. House and Senate differ and it’s still unclear when new legislation will be passed. In the meantime, Outlaw said when and if a new program is approved, it will be a switch from traditional commodity program tools to more insurance tools.

“That won’t be a problem, just different than producers and lenders are used to,” he said. “That will lead to a major education role for Extension.”

 

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