Strong demand for corn, fueled by a surge in ethanol production, brisk exports and the need for livestock feed, will also have an impact on U.S. pasture rent rates and hay prices, according to a Kansas State University Research and Extension agricultural economist.
"Historically, there has been little relationship between corn price and pasture rents," says Kevin Dhuyvetter. "Things are likely to be different this time around, though, given that high corn prices are due to an increased demand for corn, as opposed to a supply shock."
The difference, he says, stems from the fact that some land typically devoted to hay production will look tempting to farmers looking to expand corn production. Furthermore, there will be increased demand for grazing resources (putting upward pressure on rents), as producers seek alternatives to expensive concentrate-based feeding programs.
Dhuyvetter says that strong demand for corn is already helping boost pasture rent rates and corn prices. And, if grain prices remain relatively high (as many economists and market watchers expect), the result will be reduced purchase prices for calves and feeder cattle and further increases in pasture rates.