Navigating The Maize

Unstable Corn Costs Concern Valley Farmers

Posted: January 18, 2014

A Virginia Poultry Growers Cooperative employee fills a railroad car with corn at its grain facility north of Harrisonburg on Friday. Corn prices have dropped to $4.24 per bushel, a dramatic decline that should help Valley farmers who depend on the grain to feed their livestock. (Photos by Nikki Fox)
A Virginia Poultry Growers Cooperative employee fills a railroad car with corn at its grain facility north of Harrisonburg on Friday. In 2011, about 40 percent of the U.S. corn crop went into ethanol.

HARRISONBURG — A dramatic decline in corn prices should add up to more dollars in the pockets of Valley farmers who depend on the grain to feed their livestock.

Corn is selling for about $4.25 per bushel in recent trading, a drop of more than 40 percent from its high of around $8 that was reached in 2012 in large part because of major drought conditions in much of the Midwest.

If the price remains at that level, poultry, dairy and beef-cattle and other producers stand to reap the benefits. Feed represents the majority of the cost to raise livestock and birds to produce meat, milk and eggs. And corn is a significant portion of feed.

“If you are a corn producer, you are not getting as much for your product as you have in some recent years,” said Hobey Bauhan, president of the Virginia Poultry Federation. “However, I would point out that some of those higher prices are due to artificially inflated prices because of federal ethanol policies that have diverted so much of the corn crop to our gas tanks.”

The ethanol mandate, officially the Renewable Fuel Standard, requires that a growing percentage of corn go toward ethanol production each year in an effort to reduce the nation’s dependency on oil for fuel. In 2011, about 40 percent of the U.S. corn crop went into ethanol, the first time more corn went toward fuel than for feeding animals.

“There was a time when corn producers, for years, were making between $2.50 and $3.50 per bushel, and we would get concerned when prices got up to the $4.50 range. Now that range is low, compared to some of the prices we have seen in recent years,” like $7 or $8, he added.

Eric Paulson, executive secretary with the Virginia State Dairymen’s Association, said about 60 percent of the cost of raising dairy cows is attributed to feed.

“Corn is usually the most economical form of energy for dairy cows, and that’s why farmers use it for feed. A typical milk cow ration will have between 5 and 25 percent corn in it, or 3 to 12 pounds,” said Jeremy Daubert, a dairy agent with Rockingham County Extension.

Meanwhile, corn consumption by beef cattle is a fraction of what it is for dairy cattle, said Jason Carter, executive secretary with the Virginia Cattlemen’s Association.

“Dairy cattle obviously are in the business of milk production, which is a high-energy bodily function, so corn provides that energy. Beef cattle in Virginia by and large exist on forage like grass, so there isn’t a lot of need for corn consumption in beef cattle,” Carter said.

“Now, the price of corn does have significant bearing on the value of beef cattle, though. We are a calf-producing state. We don’t feed cattle in Virginia until they are ready to be harvested. We make baby calves that grow for a year or so and then they go somewhere to get finished for harvest, and corn becomes very important in those operations,” he added.

Bauhan said 70 percent of the cost of raising turkeys and chickens consists of feed.

Most poultry growers, however, don’t buy corn, he explained. Poultry companies bear that cost for the growers who raise chickens and turkeys for them under contract.

But, at the Virginia Poultry Growers Cooperative, for example, the growers actually own the company and they are more attuned to the fluctuations in corn prices.

Rodney Branson, of Branson Farms in Baker, W.Va., a member of Virginia Poultry Growers Cooperative, said the number of turkeys he raises can be anywhere from around 80,000 to 120,000, mainly depending on the price of corn.

“When you are losing money because of extremely high corn prices, which is fueled by ethanol, or at least a lot of it is, you say this doesn’t make any sense to raise turkeys and lose money, so you cut your numbers,” Branson said. “You wait for the prices of corn to come down. Either that, or you wait for the market to have less poultry on it in order for demand to go up to compensate for the higher prices.”

“Since the ethanol mandate, the volatility has been so great, it is just so unpredictable,” he said, adding the ethanol factor, combined with changing weather conditions, can result in huge corn price swings. “You might have doubling of the price in three months. How do you price turkey to the consumer …  six months to a year in advance?”

There are many variables affecting how much corn is fed to poultry on a daily basis. Based on production estimates and usage factors, Bauhan estimates that Virginia turkeys, broiler chickens and chicken table egg layers consumed about 45.6 million bushels of corn last year.

The Valley is a big corn-producing area, with a lot of it going to silage for dairy cows. But, given Virginia’s large crop in 2013, there probably will be more local corn delivered by truck to poultry feed mills than what is transported by rail from outside the state, primarily the Midwest, in a typical year, Bauhan added.

The Virginia Department of Agriculture and Consumer Services announced Jan. 10 that the state’s corn yields were expected to be 154 bushels per acre, up 51 bushels from the previous year’s yield and up 4 bushels per acre from the November forecast.

If realized, this will be a new record yield.

Total statewide production is estimated to have been 55.4 million bushels, 54 percent above the 2012 production. Corn for grain-harvested area was 360,000 acres, up 10,000 acres from last year. Corn silage harvested acreage totaled 125,000 acres, with an average yield of 20 tons per acre.

Paulson said having prices come down to current levels gives farmers certainty for the near future.

“Having the wild swings like we have had in past years is never beneficial. It makes it hard to plan. So, having a good crop like we had this year, both for grain that people buy, as well as a lot of farmers who grow corn here in Virginia … it reduces the need to buy additional feed,” he said.

“It is kind of a bonus on both sides: ‘A,’ they will be able to raise more of their own feed, which is great, and, ‘b,’ if they do need to buy feed, hopefully, that corn will be cheaper now, since we had such a great year,” Paulson added.

Contact Jonathon Shacat at 574-6286 or jshacat@dnronline.com



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