In the week after The United States Department of Agriculture’s (USDA) Nov. 8, 2013 World Agricultural Supply and Demand Estimates (WASDE) report, corn prices initially rose, only to begin a weeklong decline.

The immediate response can be attributed to U.S. corn production numbers that were slightly below trade estimates while the utilization numbers were above the levels in the September WASDE report — there was no October report because of the government shutdown.

As we pointed out recently, in 2009 a year-ending stock-to-use ratio of 13.9 percent resulted in a season average price paid to farmers of $3.55, while the USDA projects a mid-range price for the 2013 crop to be nearly $1 higher ($4.50) on a stocks-to-use ratio that is higher as well — 14.6 percent.

This alone suggests that there is more downside price potential for the current corn crop than the other direction.

While a year ago corn crop prices and crop insurance protection levels were well above the cost of production, for many — if not most — corn farmers, the Friday, Nov. 15, 2013 nearby futures closing corn price of $4.22 is likely below the full cost of production.


Check current corn futures prices


In this situation, a slight increase in the final production number or a modest decrease in utilization could have serious consequences for corn farmers and by extension other crop farmers if the prices of the other crops follow corn on a downward path.

All it takes is a 100 million bushel increase in the year-ending corn stocks for the 2013 crop to increase the stock-to-use ratio to 15.3 percent. An increase of this size or greater could easily be in the offing and send price downward.


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