“We can plant more corn and make more money,” said Chad Blindauer, 41, who farms corn, soybeans, wheat and alfalfa with his father and older brother in Mitchell, South Dakota. “It’s remarkable how well corn performs in dry weather. When farmers see corn yields going up every year and other grain yields essentially stagnate, there is a big incentive to plant more corn.”
A record crop and lower prices would make a “world of difference” in feed costs for livestock producers, which eventually would reduce U.S. retail-beef prices that reached a record in January, said Jim McCann, 67, the owner of Shining Cross Cattle Co. near Miller, Missouri.
“The price is going to come down in the supermarket because our input costs will be lower,” said McCann, whose operation in southwest Missouri buys light-weight steers, feeds them on pasture and corn and then sells them to feedlots.
Production of corn-based ethanol has tumbled to 789,000 barrels a day in the week ended Feb. 8, compared with 920,000 eight months earlier, when the drought began to send grain prices surging, U.S. Department of Energy data show. Weekly output last month was the lowest since June 2010.
Archer-Daniels-Midland Co., the largest U.S. ethanol refiner, has been paying an average premium of 34.6 cents a bushel over futures for delivery this month in Decatur, Illinois, where the company is based, up from 27 cents a year earlier, data compiled by Bloomberg show.
“We can come out of this supply hole very quickly,” said Roger Fray, the executive vice president of grain at the farmer- owned West Central Cooperative in Ralston, Iowa, with 28 locations in the state. “The odds are against a repeat of the severe drought of 2012. Cash prices will likely fall below $4 at harvest.”