MANHATTAN, Kan. (DTN) -- Corn prices pushing back above $5 a bushel on the CME futures could signal a broader change in the agricultural outlook as tightening grain supplies collide with growing demand for protein, according to a former U.S. agricultural trade negotiator.

Gregg Doud, president and CEO of the National Milk Producers Federation, was the keynote speaker Thursday at the Kansas State University Risk and Profit Conference for farmers, lenders and others involved in the state's commodity businesses.

Doud cautioned against assuming corn is headed for $6 a bushel, but he said he didn't think it would dip back to $4.50 a bushel either. A smaller U.S. crop combined with tightening global grain supplies has changed the downside risk for prices just as U.S. dairy processors are pouring billions of dollars into new capacity to capture growing consumer demand for protein.

"Things are all of a sudden alive and well in the grain markets for the first time in a long time," Doud said.

The December corn contract settled at $5.04 a bushel on Aug. 20, the first time December corn had topped $5 a bushel in August since 2023.

Doud said the corn market's recent strength reflects a broader tightening in global grain supplies rather than a speculative surge, and he warned that end users may need to rethink their assumptions about cheap feed.

"If you get a national yield that's even a couple bushels below trend, this balance sheet tightens up pretty quickly," Doud said. "We're not talking about a runaway market, but we are talking about a different downside than what people have been used to."

He pointed to a combination of factors supporting corn, including drought in Europe, the war in Ukraine and relatively tight stocks-to-use ratios compared with recent years, and stronger wheat markets that are helping pull feed grains higher.

Doud noted France could be looking at one of its worst crops on record, while corn in Europe is now selling for the equivalent of about $7 a bushel. The question is whether Europe is willing to turn to the U.S. to help fill its needs.

"They are going to need feed grains from somewhere," Doud said. He added, "Because of war and drought and everything else, there's a hole there someone will have to fill."

At the same time, Doud emphasized that the rally is not occurring in isolation. Global grain production challenges, including ongoing disruptions in parts of Eastern Europe and uneven expansion in South American acreage, are contributing to a more supportive backdrop for U.S. prices.

"The world is not awash in grain the way it felt like it was a couple of years ago," he said. "That changes how you think about risk management on the demand side."

PROTEIN DEMAND RESHAPING AGRICULTURE

While grain markets are tightening, Doud said the more structural shift in agriculture is occurring in protein demand, particularly in dairy and livestock markets.

He argued that what is often described as a "dairy story" is in reality a broader protein expansion driven by both domestic and global consumption trends.

"This isn't dairy. This is protein," Doud said. "Dairy is just one expression of a much bigger shift in how people are consuming nutrition."

He pointed to roughly $11 billion in U.S. dairy processing investments announced in recent years, much of it aimed at expanding capacity for cheese, whey and other high-protein products. That investment, he said, reflects confidence that the United States will remain a competitive global supplier of protein.

U.S. dairy exports, which are on pace to exceed $10 billion annually, also now account for roughly 16% to 17% of production, underscoring the sector's growing reliance on global demand.

Looking at current trade disputes, Doud said he did not have any inside information about talks with Canada over dairy access but said he expected any deal reached between the Trump administration and Canada to be positive for agriculture. He noted that larger issues are also being negotiated, including auto manufacturing and rules of origin.

But Doud said the most important change is not just export growth, but the composition of demand itself. Whey protein and other dairy-derived ingredients are increasingly used in sports nutrition, functional foods and dietary supplements. That trend, he said, has been reinforced by changing consumer behavior tied to weight-loss drugs and a broader focus on protein intake.

"There's a real question here about whether this is a fad or a structural shift in how people think about food," Doud said. "If it's structural, it changes the long-term demand curve for agriculture."

He also pointed to renewed consumer interest in traditional high-protein foods such as yogurt and cottage cheese as evidence that dietary preferences are evolving beyond short-term trends. That can be seen in the investments companies such as Chobani have made to expand processing capacity.

CHINA'S CHANGING ROLE AS A BUYER

The weaker link in the outlook is China, where a slowing economy, declining pork demand and efforts to increase domestic grain production could limit the agricultural import growth U.S. farmers relied on for much of the past two decades.

Offsetting those demand gains, Doud said, is a more uncertain outlook for China, which has been the dominant growth market for U.S. agricultural exports over the past two decades.

He said China's economy is facing multiple headwinds, including weaker consumer demand, stress in the real estate sector and declining internal agricultural prices, all of which could limit import growth.

"I have a hard time being optimistic about China in the near term," Doud said. "The economic model that drove a lot of their import growth just isn't functioning the way it used to."

Still, Chinese President Xi Jinping is scheduled to travel to Washington, D.C., in late September, and Doud said that meeting with President Donald Trump will be critical for short-term agricultural demand. Widespread flooding in some key crop areas in China could lead to more short-term imports of corn and wheat.

Doud also pointed to structural changes in China's livestock sector, particularly pork production, which has historically been a major driver of soybean meal demand. Chinese officials, he said, are now encouraging producers to moderate output in response to weak domestic consumption.

At the same time, China is investing heavily in domestic grain production and biotechnology, including genetically modified crops, which could reduce long-term import needs.

"China doesn't need massive yield gains to change the global balance sheet," Doud said. "Even modest improvements in productivity can have a big impact on their import demand."

That shift, he said, means U.S. agriculture can no longer assume China will provide the same steady growth in demand that it did in previous decades.

"Long term, we've got to diversify our portfolio beyond China," Doud said.

SHIFTING GLOBAL DEMAND MAP

Taken together, Doud said, the agricultural outlook is being reshaped by two competing forces: tighter global grain supplies that support prices and a reordering of global demand flows that reduces reliance on a single export market.

For U.S. producers, he said, that means both opportunity and risk.

Higher feed costs could pressure livestock margins in the short term, but stronger protein demand and improved export competitiveness could support longer-term profitability.

"The world is still going to need a lot of food," Doud said. "The question is where that demand shows up, and who is positioned to capture it."

He said the U.S. remains well positioned in protein production, particularly in dairy, beef and pork, but warned that success will depend on continued investment in processing capacity and export market diversification.

"We're in a different phase of agriculture than we were 10 or 15 years ago," Doud said. "It's not just about producing more. It's about figuring out where the value is and how you move into it."

Chris Clayton can be reached at chris.clayton@dtn.com

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