The odds are against four-dollar cash corn this year and next, at least for any extended period of time.
The monthly average cash price paid to farmers in the United States for their corn has been less than $4.00 a bushel for 27 consecutive months. It’s likely to stay that way well into 2017, says University of Illinois Agricultural Economist Darrel Good unless something changes.
On the supply side, or how much corn is around, USDA’s next Crop Production report is due November 9th. It will contain a new forecast of the size of the 2016 U.S. corn crop. Previous history of yield forecast changes in November in years when the forecast declined in September and again in October as was the case this year, says Darrel Good, show very mixed results with 5 moving lower, 1 unchanged, and 4 of the ten getting bigger. The trade is leaning toward a smaller corn yield this time around. So, not a lot of supply side help expected from the USDA reports on this fall’s crop. That make the southern hemisphere pivotal says Darrel Good.
It is too early in the South American growing season to assess yield potential, but production well below early projections would be required to push corn prices higher says Good in his Weekly Outlook on the Farm Doc Daily website. He also thinks a more likely source of a reduction in corn supply may be reduced corn acreage in the United States next year.
The good news here is that U.S. corn exports are up, but that’s based upon last year’s poor corn crop out of Brazil. It doesn’t appear feed usage will increase either, thinks Good, and while the ethanol grind has be increasing, USDA has already penciled in an extra 100 million bushels of usage.
Good says it appears that higher corn prices will be generated by a large reduction in the estimated size of the 2016 U.S. crop or stronger than projected demand for that corn.