Outlook for Grain, Hay, Energy Prices
CattleFax prediction is for grain prices to be lower in 2014; hay and energy costs to be stable.
NASHVILLE, Tenn. (Feb. 5, 2014) — Factors favor stable to increasing supplies for feedgrains and hay, so prices are likely to trend lower. Assuming energy costs remain relatively stable, lower feed costs mean business margins should improve for many cattle producers. That was the take-home message delivered by market analyst Mike Murphy, of CattleFax, during the 2014 Cattle Industry Convention in Nashville, Tenn.
CattleFax market analyst Mike Murphy said $4.75 per bushel should mark the high end of the price range for corn in 2014, with a support level at $4.10-$4.20.
Murphy noted how corn usage, as feed, had declined in response to previous high prices. However, corn usage is going up in response to recent lower prices.
“Globally, corn is the cheapest commodity,” said Murphy, citing increased U.S. acreage in production and the promise of improved moisture as reasons why corn supplies are likely to increase and prices are expected to trend lower for the next couple of years. The analyst admits that a couple of million acres could shift to soybeans, but corn growers are expected to produce a 13.5- to 14-billion-acre crop.
Murphy said a projected corn stocks-to-use ratio of 12%-14% should keep prices in check. He expects, at best, a modest spring rally. Murphy said $4.75 per bushel should mark the high end of the price range, with a support level at $4.10-$4.20.
According to Murphy, 2013 hay production was up but usage declined, leaving increased stocks. Precipitation predictions put much of the U.S. in position for good hay production in 2014. That should pressure hay prices lower, with the decline lagging in California.
While corn and hay prices are trending lower, the value of protein sources remains historically high. Murphy credited strong export demand for soybean meal, which has carried over into other protein products, including distillers' grains.
Commenting on the energy situation, Murphy said oil usage in the United States. Japan and much of Europe has declined. The exceptions are China, Russia and some other developing countries. Globally, oil usage is lower.
“The U.S. is becoming more energy independent,” said Murphy, noting sharply increased U.S. oil production. “Less reliance on imported oil puts us in a better position relative to energy costs.”
He expects retail gasoline prices to remain fairly flat during the first half of 2014, ranging from $3.25 to $3.75 per gallon. Prices may weaken during the second half of the year. Diesel prices are expected to demand a 30¢-60¢ premium, relative to gasoline.
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