Corn prices drop, feeder cattle rise

With the state of flux the U.S. Department of Agriculture (USDA) has thrown the corn business in with its fluctuating forecasts of the size of the corn crop, prices have fallen for the last week. The competition for corn between the livestock, food and energy business has suddenly taken a backseat to just trying to stabilize the business.

Corn futures on the Chicago Board of Trade were down again today, as it appears corn will be more plentiful than forecast. This, in turn, has caused feeder cattle futures on the Chicago Mercantile Exchange to rise, as the cost of corn to feed cattle directly relates to the profits for doing so. Suddenly optimism has risen in the cattle feeding business.

Until the actual ears of corn are harvested and in the bin, nobody knows how much there'll be and everyone is operating on pure speculation at this point. Nonetheless, the scary USDA forecasts during the Mississippi River flooding, appear to have been overblown. Nobody knows at what price level corn will eventually settle, but rising energy and food prices may stabilize now that one of the key inputs is moderating in cost.

Oil prices have been dropping in recent days, as U.S. consumption drops in the face of $4 gasoline and $5 diesel. Ethanol, to be financially feasible at all, has to sell for less than gasoline, and the drop in corn prices may make this possible. It had been shaky to this point.

Pity the poor farmer that actually has a corn crop in the ground, about half way to tasseling. USDA and the futures market have been reeking havoc with prices, so he has no idea what his return will be.

Such are the vagaries of farming.