Grain producers can look forward to a profitable market for several years, but cattle producers must work through some shocks in the market, a Texas Cooperative Extension specialist said.

"The overall outlook for grain producers is the best I've seen it in 20 years," said Dr. Steve Amosson, Extension economist in Amarillo.

Amosson will give High Plains producers more details on the market outlook during Profitability Workshops scheduled in January.

"With near-record prices for corn and sorghum, producers are going to have an opportunity to lock in profits for not only this year, but for the next couple of years," he said. "This means profits above all costs."

Ethanol production has raised corn use 500 million bushels in the last year, Amosson said. If the planned ethanol plants all come on line, corn usage could increase another 500 million bushels.

"In fact, in order to meet the proposed goal of producing 15 billion gallons of ethanol, we'd need to increase in corn acreage somewhere between 21 (million) to 23 million acres nationwide," he said. "We're already hearing from some seed dealers who said early corn sales are up 25 (percent) to 30 percent this year."

Some of the ethanol plants will utilize sorghum, but in the short-term the majority will be corn-based, Amosson said. The cellulosic-based ethanol production could impact the future demand for corn, but that process may still be a ways from being economical.

On another front, wheat is ringing up high prices for producers, for a different reason, he said. Production throughout the nation and world has been short.

"So producers can lock in prices around $4.50 per bushel for this year's crop, as well as next year's," Amosson said. "There's definitely an opportunity in wheat to make a profit, considering the typical price is $3.05 per bushel in this area."

While natural gas prices can wreak havoc with profits, he said the natural gas futures are showing prices to be stable or falling in the next couple of years. That not only affects irrigation pumping prices, but also fertilizer prices.

Availability of water was a concern that prompted some producers to switch to cotton to conserve water, but higher corn prices will likely bring them back, at least partly, Amosson said.

"The risk on corn production, to me, is less than that of cotton," he said. "If I had the water, I would do it. If you figure in $50 to $150 profit, above all costs, you don't see many years when that could happen.

And we're looking at it for two to three years. It's not hard to make the decision."

Other bright spots in the forecast include rising silage prices on the heels of corn, as well as an the eventual increase in cotton and soybean prices, Amosson said.

The corn acreage has to come from somewhere, he explained, predicting it would be from soybean, cotton and some wheat acreage. Shorter supplies of these crops could lead to higher prices in the future.

The not-so-bright part of the agriculture picture is with the cattle industry, Amosson said.

"They are going to see some heavy losses, especially if they bought cattle before the corn price run-up," he said. "The rule of thumb is for every 10 cent increase in corn prices, calf prices will fall $1.50 per hundredweight."

The cattle industry will go through some adjustments, he said. The distiller's grains, a by-product of the ethanol industry, will be built into feed rations to help offset some of the corn currently being fed to cattle.

Some areas have fed as much as 30 percent of the ration as distiller's grain without losing any gain, but researchers are still working out the best fit for the ethanol by-product for the Texas feeding industry, Amosson said.

In addition to learning to feed the distiller's grain, he said the industry might move to shorter feeding periods to reduce feed bills.

"It's going to be a shock to the system, and then things will start to adjust," he said.

The one caveat Amosson puts on his outlook is, "You have to produce it to make it. You can have $10 corn and if you can't produce it, it won't do you any good."

Amosson will be working with producers at several Profitability Workshops in January. During these meetings, he will go over the 2007 budgets for all crops, including dryland and irrigated, and do sensitivity analysis on yields and prices.

"Hopefully this information will give the producer a better set of knowledge to make those decisions," he said. "Last year, almost everything bled red. This year, we see black with a lot of the budgets.

"We're hoping the biggest problem after this year for producers will be income taxes," Amosson said.

Profitability Workshops are planned in the following counties:
Ochiltree, Jan. 5; Hall, Jan. 16; Hansford, Jan. 18; Dalhart, Jan. 24; Hemphill, Jan. 25; and Deaf Smith, Jan. 31.
For specific times and locations, contact the Extension agent in the county.

Writer: Kay Ledbetter