What is in this article?:
• While the business of economics often has been called the “dismal science,” the market outlook for commodities like corn continues to be good, or at least for the foreseeable future.
• The Midwest probably will plant another 3 or 4 million acres this year, while water availability will remain a big concern for Southern producers.
CORN YIELDS HIT record levels in Georgia in 2011 despite dry conditions for most areas of the state. Seventy percent of the state’s corn crop is irrigated.
Despite drought conditions in most areas of Georgia in 2011, the state’s corn growers produced a record-high average yield, and the market is expected to maintain momentum headed into this spring.
While the business of economics often has been called the “dismal science,” the market outlook for commodities like corn continues to be good, or at least for the foreseeable future, said Nathan Smith, University of Georgia Extension economist, speaking at the recent Georgia Corn Short Course in Tifton.
“The corn market has sort of flip-flopped this year from where we were one year ago in terms of our commodities in the South,” said Smith.
“The drought impacted a lot of folks, but Georgia’s irrigated corn did well with some record-breaking yields. At the same time, other crops didn’t do so well.”
Peanuts and cotton have flip-flopped somewhat in terms of which one is driving the market, says Smith, which leaves many to wonder what that’ll do to corn.
“A general term used by economists is that the cure for high prices is high prices. In other words, if prices get high enough, they’ll affect demand and there will be an over-supply, bringing prices down. We’ve seen some of that, particularly with cotton, and with the corn report in January, we’ve seen some of that on our demand side.
“Europe also has had an impact on declining corn prices. The value of the dollar, relative to Europe, has increased, and that impacts our exports. Relative to other currencies, the dollar has been rising since 2011,” he said.
Looking at the global situation for corn, said Smith, we’re increasing our use and we have record-high production, but ending stocks remain about even with demand.
The stocks-to-use ratio for corn globally was up to about the 25 to 30 percent range in the 1990s. But in 2000-2001, the relationship changed and the corn world market began getting tighter.
“We’ve been in a downward trend for the last four years, and now we’re at a record-low stocks-to-use ratio. This is a positive trend for corn, and it’s good for the U.S., because when we look at corn, soybeans and cotton, corn is where we have a competitive advantage in the world, and they’ll come to the U.S. to buy in the long-term,” said Smith.