Driving across MN and SD today I was pleasantly surprised to hear some fairly intelligent talk about agriculture on Bloomberg financial radio (on Sirius).  They usually carry on endlessly about Greek and Spanish bond yields, etc but are finally starting to realize the importance of American agriculture to the American and world economies.

One of their guests was talking about the ramifications of a 2012 US corn crop that is about 20% smaller than in recent years.  It was a very interesting discussion including the effects on the US livestock industry.

With corn above $8 and beans above $16 or 17 how livestock producers will first cull animals causing a temporary glut of meats, then market animals at lighter weights, with some producers later selling off all or most of their animals.  He described a glut of meats now and adequate but expensive feeds through corn harvest. The guest said the real squeeze will come next spring and summer when the corn is gone.

A very interesting point he made was how chicken numbers can be rebuilt in a matter of weeks, hog numbers can be rebuilt in a matter of months but cattle take years to rebuild herds to increase marketable steer numbers.  The result of this drought likely being higher beef prices longer than higher chicken or pork prices. The guest said higher corn and bean prices did not seem to be reducing exports so the shortfall will likely be absorbed inside the US. Reducing the ethanol mandate was not likely to happen in time to make much difference and would need to be replaced by additional imported oil which is not an attractive alternative. A lot of food for thought. Jim at Dawn