What is in this article?:
• While the corn market sentiment seems to have become very negative for price prospects over an extended period, the futures market is actually offering higher prices for the 2014 crop than for the 2013 crop and even higher prices for the 2015 crop.
HIGHER CORN PRICES next year and beyond would have to come from some combination of reduced foreign production, smaller U.S. crops, or increased demand for corn.
Chinese demand drawing interest
Potential corn demand by China is of the most interest. A small increase in domestic demand for corn could also be generated by an expansion in broiler and hog production. There will be much interest in the USDA’s Hogs and Pigs report to be released on Dec. 27.
The potential increase in foreign and/or domestic demand may explain a portion of the higher prices for the 2014 crop.
The most commonly cited reason for higher corn prices next year, however, is the expectation that U.S. producers will trim acreage and production in response to the decline in corn prices.
It is difficult to imagine that total crop acreage will decline in 2014 given the 8.3 million acres of prevented plantings in 2013 and the 1.6 million acres (net) released from the Conservation Reserve Program this year.
Smaller corn acreage would have to be the result of a substantial shift to other crops. Current price relationships do not point to a large shift. That leaves 2014 yield as the major factor that could support higher corn prices next year.
Not much can be said about yield potential at this point, but expecting yields below trend is less reasonable than expecting yields at or above trend value.
As always, corn producers are presented with a challenge in making pricing decisions for next year’s crop. Current conditions suggest that corn prices next year will be lower than currently reflected in the futures market, but it is early and a lot can change.
For those who use crop revenue insurance, the challenge is to assess price risk between now and the end of February when insurance prices are established. If the real threat to prices is the size of next year’s U.S. crop, downside price risk may be limited until after February.