Today, the USDA updated its monthly cattle on feed data for September.
Last month, the number of cattle placements increased by 13% year-over-year. This was a huge jump considering that markets had expected a 7% increase. Total cattle head in feed yards increased by 2.15 million.
The big jump is part of a broader, bearish trend for that market.
In August, ranchers placed 1.93 million cattle into U.S. feedlots That placement figure was a 3% increase from the same period last year.
It was also the largest August number since 2012.
There were 10.8 million head on feed as of Oct. 1.
This was a 5% increase from the same time last year.
The reason these numbers matter is that we want to understand the impact of feed demand for these cattle and other livestock.
Will this increase in “fatter cows” be a primary catalyst for corn prices now and in the future?
And how should farmers handle their inventories when it comes to selling to feed lots?
Let’s Return to the October WASDE
Looking at last week’s UDSA October WASDE report, average U.S. corn yields were on the rise while production expectations increased by nearly 100 million bushels (compared to the September report.)
We have to dig deeper into the report.
We want to know how this production figure relates to feed demand.
Total feed usage (all grains) for 2017/18 in the U.S. is slated to come in at 143.6 million metric tonnes in America.
That feed usage figure is slightly below the 144.5 million tonnes of feed grain demand last year. But is it well above the 135.3 million metric tonnes two years ago in 2015/16.
But parsing through the numbers, the only noticeable uptick comes in the form of corn usage. Total feed expectations in the corn category increased by 25 million bushels, according to the USDA.
In the corn market, 5.5 billion bushels are expected for feed and residual use. That figure represents nearly 40% of total US corn demand and signals the value of the grain to the livestock industry.
Compared to 2016/17, the 2017/18 corn-for-feed demand isn’t a huge jump at just 36 million bushels more.
While it’s not a huge jump, it does stand out compared to other feed grains, namely wheat.
The agency projected a 20% decrease in wheat feed and residual demand compared to the previous month’s report.
The agency dropped its estimate from 150 million bushels down to 120 million bushels. Sorgum and barley for feed and residual use were well off from their October 2016 figures, while oats were just 2 million bushels above last year’s total.
Ending feed stocks are expected in at 62.1 million metric tonnes, a small downturn from the same time last year.
The key number to pay attention to right now is the beginning feed grains stocks number, which fell from 63.5 million metric tonnes to 62.1 million metric tonnes.
Though it is a slight decline, feed grain stocks began 2017/18 more than 20% higher than last year.
Looking at today’s Livestock report, we want to weigh how these numbers may change.
More important, can rising livestock expectations help propel corn prices?
Expected Production in 2018
The question of course is what we can expect in terms of increased domestic production and what that will mean for feed prices moving forward.
Total beef production estimates sit at 27.362 billion pounds in 2018, according to the USDA. That figure is an increase of 746 million pounds during 2017. Overall consumption is 736 million pounds for beef.
In the pork markets, the total output estimate is 26.731 billion pounds. That’s a 874 million pound increase from 2017. About 25% or 212 million of those pounds are slated for exports, as foreign markets continue to gobble up American production. 
The expansion complements news that other pork-producing nations are planning to expand hog production in the year ahead.
The WASDE projected a 1.0% jump in hog production this year and 1.8% next year.
Will those figures push corn prices higher?
It may not.
With massive harvests in both the U.S. for both corn and soybeans, we are still facing massive stocks.
The WASDE report indicated that foreign demand for animal feed fell by 440,000 metric tonnes in the 2016/17 year. 
China, now the world’s largest pork producer, has plenty of corn in its reserves.
According to the Mays Report, the average corn price on the farm will fall in 2018. The average farm price per bushel has declined every year since 2013 when Mays calculated the figure at $6.89.
In 2017, that figure hit $3.36.
Mays forecasts that the average price will fall to $3.20.
These estimates come at a time that the December contract is sitting around $3.50.
With US corn harvest well on its way, markets have likely priced in the harvest lows.
Lower feed prices could lead to an expansion of the both cattle and hog figures. 
What are Feed Buyers Thinking?
It’s fair to argue that we’re looking at seasonal lows for corn prices right now. One can also make the case for “lower but longer.”
Buyers will want to avoid a major upswing in prices and the uncertainty fueled by market volatility. Many will begin to tap into more stable prices at the height of harvest season.
Last week, the U.S. harvest was lagging the five-year average by double-digits.
As we noted on Wednesday, the market anticipates some acceleration in the pace of the corn harvest this week, but many farmers may choose to let their corn remain in the field to save on drying costs.
Right now, Bob Utterback of Utterback Marketing is advising buyers to start building inventories. Explaining that seasonal markets are a time when supply outpaces demand, he argues that only a major weather event would lead to significant changes in grain market prices.
That sentiment widely felt by analysts. And fall prices are the historical time of year when corn prices are at their low.
Utterback argues that buyers should realize their bias in the market.
“Your market bias is a function of your position in the market. As a feed buyer, your biggest enemy is getting too bearish or for a grain seller getting too bullish,” Utterback said in an AgWeb interview.
What to Expect for Corn Prices
We have to stress a similar sentiment to our audience of farmers who are selling grain.
You do have to be realistic about what to expect for corn prices right now.
With that December price hovering under $3.50 and cash prices under $3.30, we’re likely to see farmers hold onto more of their grain in the hope of rising prices.
The carry in the corn market is currnetly about 15 cents a bushel to the March 2018 futures contract and 25 cents to the May 2018.
There may be opportunity when we see some blips in the short term, especially as we turn our attention to the declining corn production numbers out of South America.
Get Higher Corn Prices on FarmLead
We recently saw a few farmers who were able to secure 30 cents more per bushel than what local bids were.
A buyer was short on their position and needed some product fast. Instead of making phonecall after phonecall, they came to FarmLead where they know there are motivated sellers.
With corn prices low, it’s also a smart time to test your grain.
You should consider sending it to our partner labs in the United States and Canada via the recently launched GrainTests.com. Many elevators fail to provide you with a full specification sheet on all of the metrics surrounding your grain.
With the right specs, you can set your price higher and maybe attract a buyer from outside your traditional network. You won’t know if you don’t try to market your grain and get a better price.
At today’s current cash prices, why not shop your grain a little bit more.