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• This coming year may not be as good as this past year, but corn prices still should be pretty good.”
• There’s an opportunity, at 120 bushels, to see a little profit on corn.”
Consumption has increased
Corn consumption, from 1995 through 2011, has increased, says Runge. “Exports have stayed fairly steady. Food, seed and industrial uses of corn, including ethanol, has increased markedly. Not that long ago, 5 percent of U.S. corn production was going to ethanol. Now, we’re up to almost 40 percent going to ethanol production. Is that good or bad? It depends on whether you’re buying or selling corn. If you’re growing and selling corn, it’s probably not that bad. If you’re trying to buy corn to feed, it’s not good.”
Unless something changes, he adds, this situation will remain. “Ethanol usage was supposed to be 12 billion gallons back in 2010, up to about 14.5 billion by 2015, and then 15 billion starting in 2016, and that’s only five years away.”
Back in 2002-2001, says Runge, China was exporting a lot of corn. But in the last three years, they’re importing a lot more corn. They can provide a lot more jobs, especially in their textile spinning mills, if they plant cotton, he says.
Corn world ending stocks continue to fall, he says, due to weather problems and demand.
“In the commodity markets, the rules changed,” says Runge. “Up until about 1999, the market was limited and not everyone could get in. The hedge funds and the Wall Street money couldn’t get in up until that time. In 1999, the rules changed, and there were new investors who wanted a return on their money.
“Now, there’s quite a bit of Wall Street money in the commodity markets, and it makes it more difficult to say what we think prices might be. But thankfully, supply and demand does still have something to do with it.”
Looking at commodity prices from a year ago, corn hasn’t changed much, he says. Soybeans were about $1 higher, and cotton was about 14 cents higher a year ago.
“But input costs are going up. Nitrogen, phosphorus and potassium all will be going up. The good news is that we’re not as bad off as at the end of 2008. That’s when commodities ran up and inputs went up along with them.”
Runge advises growers to look at and price nitrogen. About 55 percent of our nitrogen is imported and 81 percent of potash comes from overseas, he says. The U.S. has about 90 percent of the world’s supply of phosphate, exporting 44 percent.
“The good news is that chemicals haven’t gone up too much and are holding fairly steady. Seed prices will be up some this year, and peanut seed is expected to be up quite a bit.”
Growers can expect that loan requests will be more thoroughly analyzed this year, says Runge.
Bankers possibly will be requesting more information.