What is in this article?:
- Texas A&M Economist Mark Welch says there's still some bullishness left in the U.S. corn market.
- Worldwide per capita corn use continues to grower, more than other grains.
- There's still good incentive for U.S. growers to plant corn in 2014.
JUDGING FROM world per-capita consumption, it’s a good time to be a grain farmer
Marginal increase for food
If U.S. feed and residual use continues to increase, it could get back to about 5.5 million bushels, says Welch. He also sees a slight increase for ethanol and a marginal increase for food.
“There will be some export opportunities, so I see us rebounding to average levels of the last four to five years on the feed and export side. In estimating prices for next year, I plugged in different acreages, at 97, 95 and 93 million acres of corn, along with a trend line yield of 159. Currently, USDA is estimating a 1.8 billion-bushel carryover.”
Iowa State University economist Bob Wisner states that given the inelasticity of the demand curve in corn, a 1 percent change in the corn supply can change the price by about 5 percent, says Welch.
“Given our current numbers, with 97 million acres of corn next year and a trend line corn yield of 159 bushels, we’d be looking at a season-average price of about $4.40 per bushel. At 95 million acres, the price would be about $5, and at 93 million acres, about $5.40. There’s a great deal of variability around those production numbers for 2013, which gives us price variability.”
University of Illinois budgets for 2014, using a $250 cash rent and a 200-bushel yield, calculate that the break-even price for corn in central Illinois is $4.10 per bushel.
“So there’s still a good incentive to plant corn. The soybean/corn price ratio and other things will play into planting decisions, but there’s still a cushion there to grow corn with these kinds of numbers. With any kind of acreage question or yield concerns, we could get that price back up pretty quickly, and I think there will be some bargaining opportunities for us.