“All everybody wants to talk about today is the weather and corn planted acres, but the real story is that exports, feed usage and corn for ethanol are down.”

Corn carryover for 2012-13 is estimated at 669 million bushels, Brock said. “That is really tight. That’s what everybody wants to talk about in the coffee shop. The cash corn market right now is hopping like there’s no tomorrow. You have basis levels that are the highest they’ve ever been in old crop corn. But there are two markets, old crop and new crop.”

In a recent outlook, USDA estimated that the United States would plant 96.5 million acres of corn this coming year, but Brock believes even his own estimate is low at 98 million acres. “I think we will have to raise it to 99 million acres. However, you will be bringing in marginal acreage that you won’t make big yields on. So we will probably not get trend line yields.”

But if trend line yields, or something close to it, are attained, carryover jumps from 669 bushels to 3.2 million bushels the following year. “That’s a lot corn. The function of a market is to ration supply. That’s what price is for. If you get too much of something, the function of price is to get low enough that we will use it. If you get too little of something, the function of price is to get high enough so that we don’t run out.”

Brock says many U.S. livestock producers “are looking at the potential for corn getting really dirt cheap, so they're expanding right now so they’ll be able to feed really cheap corn. Everybody in the business sees this freight train coming, which will hit about September.”

Brock believes overall farm revenue will again be up in 2013, especially since “a lot of farmers are paying up for crop revenue insurance because of what happened last year. The scary part is 2014. If I’m close to being right, we’re going to be looking at some really low prices, and less revenue.”

While Brock is pessimistic on corn price and gross revenue, he’s a little more optimistic on profit. “Most producers are better off with $4 corn and 250-bushel yields than 140-bushel yields and $7 corn. You do have to think in terms of profit rather than price. This is not the end of the corn industry. Everybody is still going to make money, but the profit is going to come in another way.”

USDA’s estimate of a 2013-14 average cash soybean price of $10.50, “implies even lower prices at harvest,” Brock said.

Brock says the tightness in old crop soybeans will add support to that market, “but don’t confuse old with the new because $13 soybeans are still high priced, and any rally needs to be sold. Farming is cyclical, producers need to remember that. Producers under age 50 really haven’t seen really bad times in farming. Most of the others have been through this before. Bad times don’t last forever, but unfortunately the good ones don't either.”

erobinson@farmpress.com

 

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