The 2010 corn crop is shaping up to be a good one in terms of prices. Signs of an economic recovery point to a rebound in feed use, ethanol use and exports and an increase in overall demand for U.S.-grown corn.
University of Georgia Extension Ag Economist Nathan Smith believes Georgia farmers should be able to capture prices of about $4 per bushel. While that’s somewhat below the seasonal average price for the 2009 crop which reached $4.06 per bushel for the U.S. and $4.60 per bushel in Georgia, prices at the $4 level should allow many farmers to grow the crop for a profit this year.
“I hope this outlook will please you,” said Smith while speaking to farmers attending the recent Corn Short Course held in Tifton, Ga. “Looking back at 2009, we saw that corn acreage was up in both the U.S. and Georgia. Also, we saw record yields of 140 bushels per acre for corn grown in Georgia. It is estimated that two thirds of the Georgia corn crop is irrigated, and that is a good trend. It’s the main reason for the higher yields we’re seeing.” Total Georgia corn production approached 50 million bushels in 2009, and that’s enough corn to supply about 20 percent of the state’s total feed use.
Corn yields for both the United States and Georgia have been rising steadily, and Smith expects this trend to continue. “Assume that yields will keep going up for the purposes of budgeting,” he adds.
Looking at world supply and demand, Smith notes that China, Argentina and Brazil all saw declines in corn production. “This means the U.S. is the major supplier of corn in the world,” adds Smith. Corn exports are projected to increase to 2.1 billion bushels as a result of overall U.S. supplies, lower world supplies and lower prices for corn.
Smith believes U.S. corn plantings could reach 90 million acres this year, compared to 86.4 million acres planted in 2009. “Wheat acreage is down for the U.S. and for Georgia, and that could result in increased corn plantings,” he says. “Right now, we expect to see about 400,000 acres of corn grown in Georgia.”
He notes that in January USDA raised its estimate of 2009 average yields by 2.3 bushels per acre. “This was a big surprise,” he adds. “Raising the yield estimate also resulted in raising the estimate for expected carryover. However, the key I see is that use and demand will drive production and we could actually see a tight carryover for this year’s crop.”
Smith explains that one-third of corn use goes for ethanol. Corn use for ethanol could grow another 14 percent in 2010. Smith says economists expect to see rising gasoline prices during 2010. Also, it’s possible that the maximum amount of ethanol allowed in fuel blends could be raised to 15 percent, and that could also boost corn prices and corn use for ethanol.
Until this year, corn feed use has been declining, but Smith expects that trend to reverse itself this year. Moderate feed prices to the livestock and poultry industries could encourage an increase in feed use. This use could reach 5.4 billion bushels this year.
Overall, Smith believes corn consumption to reach about 13 billion bushels in 2010. “If this occurs, consumption is forecast to slightly exceed production to leave a carryover of slightly less than what we saw with for 2009,” he adds.
Smith does not anticipate seeing price levels drop below $3 per bushel. “The price has dropped recently, and the prices were testing the $3.60-per-bushel support level,” he explains. “While I’m not sure about pricing now, even if we see an acreage increase, I believe there may be opportunities for farmers in Georgia to capture prices of $4 per bushel in their local markets.”
He also addressed production costs anticipated for this year. “We expect fuel prices to increase during the first half of 2010,” he says. “We expect to see a moderate increase in fertilizer prices, and we expect seed prices to grow by six to seven percent this year.” He says fertilizer, followed by seed and irrigation, are the biggest cost items for growing corn in Georgia. Seed prices are expected to range between $190 and $265 per bag, depending on the hybrid and the technology added to the seed.
Fertilizer prices declined dramatically in 2009 following the highs reached in 2008. Nitrogen prices have dramatically declined to levels of 40 to 50 cents per pound at the end of 2009.
Smith also briefly addressed the outlook for soybeans and said, “I’m not real bullish on soybeans,” he said. “We’ve seen increased soybean production in South America. And unless China keeps buying beans, we could be in for some downward pressure on soybean prices for 2010.”