Speaking to producers at the Cattle Industry Convention in San Antonio on Feb. 5, Murphy said conditions are conducive to higher productions, and demand on a global perspective is growing more stable. Stocks-to-use levels for corn, wheat and soybeans are all on the increase, and supplies are expected to build further in 2015.
“As we start to look at our forecast for 2015, it’s important from our standpoint to note that we’re not forecasting another bumper crop. But we’re looking at a yield that’s closer to a trend line.”
The prices for many grains and feeds should also be holding stable, Murphy said, with spot corn futures prices averaging around $3.60 per bushel, down from $4.16 per bushel a year ago. The acreage for corn plantings will drop from 13.5 billion to 13.3 billion.
Positive weather and precipitation will also help the hay production outlook, Murphy said.
“We would expect another increase in hay production – not only what we came from in 2014, but looking to 2015 as well,” Murphy explained. “It’s going to mean a little more relief from a price standpoint. Not only when we look at grass hay, but also as we look at alfalfa, for those end users in feedyard or dairy sector.”
Energy prices
Corn grain availability is also rising in the feed-and-residual category due to the downturn in energy prices. Corn use in ethanol dropped midway through 2014 as oil prices began to drop. Continuing uncertainty about the Renewable Fuels Standard (RFS) is also pushing more supply of corn to feed. For that reason, the amount of corn dedicated to ethanol will not change drastically from its current range of 5 billion bushels each year.
Murphy said the price of oil and gasoline is largely being shaped by higher production and more supply.
“We’ve become less reliant, if you will, on the globe, in terms of supplying energy or oil,” Murphy said. “We’re seeing a lot of benefit in terms of what this Shell oil drilling has done from a domestic standpoint. Not only is it bringing more jobs into the U.S., but it’s taken us to less of a risk geopolitically. That helps in some regards to offset that volatility in the energy market.”
Between 2005 and 2010, the U.S. crude oil production level held flat at between 1.8 to 1.9 billion barrels a year. Since then it has jumped to 3.1 billion barrels in 2014.
In that same period of time, the volume of crude oil imports has dropped from 3.3 billion barrels to 2.7 billion barrels.
Adding to those production trends, most Americans are using less gasoline and diesel products, reducing the demand for a refined product.
Murphy predicts that the price of crude oil should still hover between $40 to $70 per barrel through 2015, but probably staying closer to $70. 
PHOTO
CattleFax analyst Mike Murphy speaking at the Cattle Industry Convention in San Antonio on Feb. 5. Photo by David Cooper.
