• After what has been considered a disappointing corn yield for the 2010/11 crop year, the corn market has struggled to find a sense of balance between expected demand and available supply.
While the 152.8 bushel per acre national average yield is the fourth largest on record,we also have unprecedented demand — partly due to the expected use of 5 billion bushels of corn to make ethanol, and a rapidly growing demand from emerging economies such as China and India.
Add in the effect of global unrest in oil-producing countries, the earthquake in Japan and you soon realize the potential for increased volatility in world markets.
From April 20 to April 29, a period of eight trading days, the May Corn Futures had ranges greater than the daily limits allowable four times.
With the ending stocks number shrinking ever since the end of harvest, settling at 675 million bushels, it has become evident that “rationing” of this year’s crop is inevitable.
Economists now turn to the outlook for the 2011/12 growing season and will continue to assess the possibility of planting the 92 million acres of corn. Average/trend yields could potentially bring the ending stocks number closer to the 1 billion bushel level that most economists consider necessary for market balance and stability.
While we will continue to monitor the Quarterly Stocks in All Position reports to assess the impact of higher prices on rationing, the current growing conditions will warrant close attention.
With the Weekly Crop Progress numbers for May 1, 2011 showing the planting progress behind last year, and more importantly behind the five year average, monitoring the weekly progress of the corn crop is crucial to price risk management plans.
The Crop Progress Report showed corn planting at 13 percent complete as of May 1, 2011 compared to the five year average of 40 percent complete. While this lag in planting progress is important, it is not the ultimate defining issue for this year’s corn crop. We have planted “late crops” in the past and had respectable corn yields at the end of the growing season.
Producers can keep abreast of crop development issues throughout the year by following Jim Hilker’s monthly Outlook posting. It can be found at https://www.msu.edu/~hilker/outlook.htm. Jim updates the critical events related to crop development and adjusts his Supply and Demand report to reflect these changes.
The consensus of respected university economists, throughout the Corn Belt, is that this crop year will continue to reflect the uncertainty of supply and demand, which may lead to unprecedented market volatility. Due to this market volatility,pricing and purchasing opportunities will be present during the upcoming growing season.