What is in this article?:
- Corn, soybean prices searching for support
- Corn expectations more mixed
• A change in the trend of lower prices will require an additional supply shock or evidence that supplies have not been sufficiently rationed
• While corn and soybean prices have declined sharply from their peaks, prices are still very high by any measure.
• The pace at which prices transition to lower levels will be determined by a number of factors, beginning with the USDA’s October production forecasts.
Prices over the past two months for corn and the past month for soybeans appear to be in the classic “short-crop, long-tail” pattern where prices peak early in a year of sharply lower production and then decline in the post-harvest period as the smaller supplies get rationed and production rebounds in the following year, according to University of Illinois agricultural economist Darrel Good.
Good reported that the December 2012 corn futures declined by $1.44 (17 percent) from the high on Aug. 10 to the recent low on Sept. 28. That contract has managed a recovery of about 40 cents so far this month.
November 2012 soybean futures declined by $2.85 (16 percent) from the high on Sept. 4 to the low on Oct. 3 and have rebounded about 45 cents since then.
“A change in the trend of lower prices will require an additional supply shock or evidence that supplies have not been sufficiently rationed,” Good said.
“On the supply side for corn, prospects of a bumper crop in China and expectations that production in Argentina will rebound and Brazilian production will remain large in 2013 continue to weigh on U.S. export prospects.”
Good said that expectations of substantial (75 million bushels or more) imports of corn into the United States this year also offset some of the concerns about the shortfall in the U.S. crop.
“Declining production prospects for the Australian wheat crop and dryness in some U.S. winter wheat areas have not provided much support for corn prices to date,” Good said.
“For soybeans, expectations are for a sharp recovery in South American production to record levels in 2013, providing sufficient world supplies in the last half of the 2012-13 marketing year.
“Declining prospects for the current Canadian canola crop have not resulted in much support for soybean prices,” Good continued.
“With expectations of very large crops in South America in 2013, some supply shocks are still possible, but there are no immediate threats to those crops.”
In the short-run, the USDA’s forecast of the size of the U.S. corn and soybean crops to be released on Oct. 11 will be the most important supply information, Good said.
“There are growing expectations that the forecast of the U.S average soybean yield will be increased, adding as much as 175 million bushels to the forecast of crop size,” Good said.