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Weak exports create limp futures

By Staff | Jan 16, 2016

URBANA, Ill. (University of Illinois) – The high corn prices of late-2010 through mid-2014 were associated with a combination of strong demand resulting from growing ethanol production, high livestock prices and reduced supply resulting from the small U.S. corn crops of 2010, 2011, and especially 2012.

According to a University of Illinois agricultural economist, the lower prices of the past 17 months are the result of the large U.S. corn crops of the past three years, plateauing ethanol production, lower livestock prices and expanding foreign coarse grain production.

Darrel Good reported that the monthly average price of corn received by U.S. farmers exceeded $4 per bushel for 46 consecutive months from September 2010 through July 2014.

The simple average of those monthly prices was $5.85, in a range of $4.06 (July 2014) to $7.63 (August 2012).

Foreign coarse grain production increased from 769 million metric tons in 2010-11 to 918 million metric tons in 2014-15.

Increasing foreign grain production, along with global economic weakness and a stronger U.S. dollar, has resulted in a substantial year-over-year reduction in corn exports during the first 18 weeks of the 2015-16 marketing year.

According to Good, cumulative marketing-year U.S. corn export inspections as of Jan. 7, totaled 395 million bushels.

For the first three months of the marketing year, Census export estimates exceeded inspections by 27 million bushels.

“Shipments to other large importers early last year (Japan, South Korea, Egypt, Columbia, and Peru) are down 41 percent.

According to Good, a return of U.S. average corn prices above $4.00 per bushel is not expected in the near term.

“Prices at that level will likely require some crop production concerns during the upcoming U.S. growing season,” he said. “Periods of production concerns may well develop this summer as the demise of the current strong El Nio event points to an elevated risk of the 2016 U.S. average corn yield falling below trend value.”

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