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Poor corn crop would close meat, poultry plants, economist says

If this year's corn yields drop much below the base of 145 bushels per acre, it will force some meat and poultry plants that rely on that grain for feed to close, said Dr. Thomas Elam, president of FarmEcon LLC.

If this year's corn yields drop much below the base of 145 bushels per acre, it will force some meat and poultry plants that rely on that grain for feed to close, said Dr. Thomas Elam, president of FarmEcon LLC.

Elam spoke on this topic during the March 26 Farm Journal/WATT Grain and Meat Outlook Webinar, which can be viewed on demand.

He said that if the base forecast were to hold true, the average U.S. price for corn would be around $7 per bushel. Under that scenario, there would be some room for expansion of protein consumption, and the profitability of meat and poultry production would improve.

However, if yields dropped as low as 130, Elam said, the picture would be grim.

"That would still be more than we produced last year, but because or carryover supplies are at pipeline minimum levels, it would mean lower feed supply and much higher feed costs. … If we get much below 140 bushels an acre, we might see $8 or $8.50 corn, not on the average for the year, but certainly a big piece of it," Elam said. "It would shut down some more protein and ethanol companies."

The meat and poultry industries have already suffered enough, Elam said, as nine poultry companies have gone bankrupt since 2008, and two others were forced to sell to avoid bankruptcy. Two more meat plants shut down in March, he added.

However, if yields exceed the forecast and reach 155 bushels, Elam said there would a significant rebound in feed use and exports. It would enable protein production to expand, and there would be significantly more profitability for feeders.

Corn yields should improve from 2013, but by how much?

Any scenario is possible for corn yields, said Chip Flory, ProFarmer editor, who also spoke at the webinar hosted by WATTAgNet and Farm Journal.

After discussing the apparent improvement of drought conditions in corn-growing regions, Flory was optimistic the corn crop will improve.

"It's better than it was last fall, but better than last fall doesn't mean it's good," Flory said.

According to ProFarmer estimates, last year's average yield was 123.4 bushels, and a yield of 140 for 2013 would be considered poor. An average yield would be 150, and an excellent yield would be 160.

Projected planted acreage is at 98 million acreas, up .8 million over last year, according to Flory's figures.

Some of the increased acreage may not yield as high, Elam indicated, as some of the new ground will be on lower productivity soils.

Flory also spoke cautiously that the March 9 rains in the Corn Belt may not have eased the drought conditions as much as some thought.

"They were very generous rains, there's no question about that. But immediately following those rains the farm ponds were overflowing and the rivers and creeks were running full," said Flory. "It really didn't soak a lot of that in."

Wide range projected for corn prices

With the quality of the corn crop in question, so is the price this fall. When asked to predict the price of corn this fall, Elam gave a broad range, saying it will largely depend on the weather, the moisture levels, and whether farmers can get the crop planted at the optimum time.

"With these carryover supplies, it's a loaded gun," said Elam. "Four-dollar corn and $8 corn are equally probable. The gun is out there, it's loaded, and it's called the western Corn Belt drought."

Flory agreed with Elam's assessment. However, he included that with an average yield of 160, the price could be expected to drop as low as $5.50 a bushel. If it only yielded 140, it would be around $7.25.

Elam cautioned that because of minimal grain inventories, grain prices will be extremely volatile over the summer.

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