World Grain - December 2006 - 46

FEATURE

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News Roundup
High maize prices may
erode cattle feeding margins
WASHINGTON, D.C., U.S. - Sharply higher maize prices in
2007 will erode cattle feeding margins unless U.S. cattle feeders can buy feeder cattle much cheaper, analysts say.
The U.S. Department of Agriculture's (USDA) latest forecast for the 2006 maize crop is 10.74 billion bushels. Although
the crop is the third largest on record, it will result in ending
stocks of only 935 million bushels. That's only 7.9% of likely
usage, given the expected increase demands of ethanol manufacturers.
Average maize prices in 2007 are expected to be well in
excess of U.S.$3 per bushel. That would be more than 50%
higher than the average 2006 price. Meanwhile, the U.S. may
have had close to a record number of cattle on feed as of
Nov. 1.
USDA's report produced no surprises, except to those who
believed the maize crop would be higher than 10.8 billion
bushels. The futures markets had fully discounted a 10.75 billion bushel crop, analysts said. After the report was released,
feeder cattle futures closed 115 to 167 points higher, but maize

futures closed 72 to 82 points lower. Also supportive was the
USDA's forecast for a record soybean crop of 3.2 billion bushels, up slightly from its October forecast and 5% above 2005.
USDA's report showed that this year's maize crop will come
from 71 million harvested acres, with a yield of 151.2 bushels
per acre. That's the second largest yield on record. The 2005
maize crop of 11.1 billion bushels came from 75.1 million
acres, with a yield of 149.7 bushels per acre. A key factor
next year will be by how much the maize acreage and yield
increase. A return to 2005's acreage, at 2006's yield, would
produce another 610 million bushels of maize. As previously
reported, analysts say another 6 to 7 million acres of maize
will need to be planted next spring to meet domestic and exports demand.
Cattle feeding margins could be increasingly squeezed by
higher maize prices and feeder cattle prices that will remain
stronger than expected because of drought, according to analysts. The drought and subsequent lack of forage caused many
cow-calf producers to put expansion plans on hold.

Drought forces Australia to import feed grain
MELBOURNE, AUSTRALIA - The Australian federal government expects the first imports of feed grain for livestock to
arrive in Australia in January to ease looming shortages. More
than 40 import applications are being assessed from companies wanting to fill shortfalls caused by the drought.
Biosecurity Australia officers are making assessments of
wheat, maize and sorghum in the U.K and Canada. Agricul-

ture Minister Peter McGauran says the imports are not likely
to make a major difference in prices.
"It's a question of balance that we have a million cattle in
feedlots at present, and of course, the dairy, pig meat and
chicken industries are terribly dependent on grain," he said.
"So for those who are able to produce grain, we don't want to
suppress their price."

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World Grain - December 2006

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