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Outlook for Grain and Feed

Outlook for Grain and Feed. Todd M. Schmit, Assistant Professor and William G. Tomek, Professor Emeritus Agribusiness Economic Outlook Conference December 18, 2007 Ithaca, New York. Grains & Oilseeds. William G. Tomek, Professor Emeritus. Livestock Feed Costs.

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Outlook for Grain and Feed

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  1. Outlook for Grain and Feed Todd M. Schmit, Assistant Professor and William G. Tomek, Professor Emeritus Agribusiness Economic Outlook Conference December 18, 2007 Ithaca, New York

  2. Grains & Oilseeds William G. Tomek, Professor Emeritus

  3. Livestock Feed Costs Todd M. Schmit, Assistant Professor

  4. What can happen in a year? Sources: Ag Prices (USDA), Feedstuffs (Buffalo)

  5. Biofuels Development and Feed Cost Relations… • Growing demands for, and production of, biofuels is increasing commodity prices and price variability… • Production no longer confined to the Corn Belt implying increased national and local pricing impacts –access to feedstock inputs, location to output demands • Ethanol impacts corn, but also soybeans, wheat, etc -- acreage decisions, rotation decisions, land prices • Biofuels production growth outpacing refinery capacity and utilization? • Infrastructure limitations limiting downstream growth • MTBE-related production demands being met • Utilization based on economic conditions (economic value) • Break even Corn Price: Ethanol Value ~ 3:1, recent prices have narrowed margins, growth continuing but likely slower

  6. Biofuels Development and Feed Cost Relations… Growth in biofuels production  growth in by-product feeds • DDGS from corn dry milling for ethanol • Historically fed for years, but in relatively short supply • Large increase in supply will put downward pressure on prices • Nutritional limitations - high unsaturated fat, low lysine, high P • Quality concerns – variation in nutrient composition • Plants would rather market as wet to avoid drying costs • Increases in soybean crush for biodiesel  SBM • Pricing effects linked with other commodity price effects • Increased crush will increase supply of SBM • Crushing capacity sufficient for sustained industry growth? • Other oil feedstocks as inputs

  7. Ethanol Price Near Futures…

  8. Primary Feed Ingredients … Corn

  9. Primary Feed Ingredients … Soybean Meal

  10. Other Feed Ingredients … Source: USDA Feed Grains Database

  11. Feed Cost Analysis • Complete feed prices for the Northeast U.S. -- Dairy, Hogs, Broilers, Layers • Crop commodity and feed ingredient prices are FOB Buffalo, NY. • Model derives technical feed cost relationships, can change continuously with the cost of the respective input • What level of cost-savings can we expect from lower priced, biofuels by-product feeds

  12. Outlook • Using longer term commodity price forecasts, higher level of livestock feed prices are expected to continue. with increased variability. • Based on historical utilization and relative prices, offsetting by-product price impacts are expected to be limited (~2%), at least in the short run. • Improved product quality and consistency may increase utilization and improve feed cost offsets. • Plant production, marketing and branding of by-product feed components will likely drive utilization.

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