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Are best corn prices behind us?

By Staff | Nov 21, 2012

Chad Hart, an Iowa State University grain markets specialist, presents his analysis of markets for the coming year during the annual Pro Ag meeting ion Nov. 15 in Mason City.



MASON CITY – The crop year of 2012 is now history. Farmers know how much they have to sell so the only unknown left of 2012 is what direction prices are headed.

With 2013 only weeks away Iowa State University Extension held a meeting for farmers and ag professionals on Nov.15 at the 4-H Learning Center located on the North Iowa Fairgrounds near Mason City on markets and managing risks.

Chad Hart, an ISU grain markets specialist, presented his views on corn and soybean prices.

Hart showed that corn usage in 2009 and 2010 was at 13.066 and 13.055 billion bushels, respectively. Prior to the drought, 2012 could have been a 14 bb corn crop instead of the 11.167 bb that were harvested.

Corn ending stocks for the last five years peaked in 2009 at 1.708 bb and then dropped to 1.1 bb 2010 and 988 million bushels in 2011.

Ending stocks for 2012 are estimated to be 647 million bushels.

Prices for corn reflected the change in supply with an average price per bushel of $3.55 in 2009, $5.18 in 2010, $6.22 in 2011 and $7.60 for 2012.

Soybeans have a similar story with smaller crops, tighter supplies and higher prices.

2009 was the best bean crop in the past five years with 3.36 bb. 2010 produced 3.28 bb and 2011 grew 3.15 bb.

Ending stocks peaked in 2010 at 215 million bushels, dropping to 169 million bushels in 2011 and 140 million bushels for 2012.

Soybean prices have steadily climbed from $9.59 in 2009, to $11.30 in 2010, $12.50 in 2011 and $14.90 in 2012.

However, Hart said, “Our best prices are in our rear view mirror”

Hart sees prices working their way down to cost of production as indicated by futures prices. Corn averages $6.87 until October 2013, then will average $5.98 through October 2014, falling to $5.62 prior to harvest 2015.

Soybean futures also drop, but not as much as corn.

For 2012-2013 soybeans futures are $14.01 and 2013-2014 are $12.74.

Hart points to Chinese soybean purchases as a positive influence and South American production having a negative influence on prices.

Hart said that bean prices will have more support because in the food (soybeans) versus fuel (corn) debate, food wins.

“$16 soybeans have not scared China off,” said Hart.

High feed costs have resulted in declining meat production across the board, he said, whittling off domestic demand for corn. “It will take some time for demand to build again.”

When demand recovers, poultry will lead the way, according to Hart.

In addition to lowered livestock usage, corn faces a problem with a reduced grind for ethanol dropping from 98 million bushels in early summer of 2012 to 83 million bushels by late summer and recovering to 88 million bushels during autumn.

Gasoline consumption in the U.S. has been dropping since 2007 when the recession began and with more fuel efficient cars on the road. Gas consumption has fallen from 143 billion gallons in 2007 to 133 billion gallons in 2012.

With ethanol at a 10 percent blend, falling consumption translates to reduced demand for ethanol.

In spite of falling prices, questionable weather and demand reduction creating narrowing margins, Hart predicted 2013 to be another profitable year for farmers.

Crop insurance

The Risk Management Agency, which administers the federal crop insurance, told roducers about trend adjusted yield that allows farmeras to adjust actual production history upward to take advantage of recent increases in yields due to improved technology.

The formula used in the presentation resulted in raising the average of earlier years used in the APH calculations.

It is updated annually on a county by county basis.

More information on this can be found at www.rma.usda.gov.

The trend adjusted yield for counties can be found under the heading Information Browser under the heading Browse by Subject.

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