Good reported that soybean prices are being supported by a rapid pace of exports and domestic consumption. However, prospects are still in place for a record harvest in South America. “Such a crop, in combination with a rebound in U.S production in 2013 would likely result in a buildup of stocks next year and prices at the level of late 2011,” he said.   

According to Good, March 2013 corn futures dropped below $5.50 in early May 2012 and were drifting lower when U.S. drought conditions turned prices higher starting in mid-June.The price of that contract peaked in early August, just short of the $8.50 mark. March 2013 soybean futures dropped below $11.50 in December 2011 before South American drought conditions and then U.S. drought conditions sent that contract above $17.25 by mid-September 2012.

“Corn prices have declined by more than $1.00 since the late summer peak, while soybean prices have declined by more than $3.00,” Good said. “The general expectation has been that prices of both commodities would return to pre-drought levels as early as 2013 as consumption adjusted to the lower supplies and as production rebounded in both the South America and the United States. The futures market currently reflects expectations that corn prices will moderate substantially from current levels by the fall of 2013 as larger crops are harvested in Argentina and then in the U.S.,” he said.

Good reported that December 2013 futures, for example, are priced $.95 below December 2012 futures. The soybean market expects prices to moderate from current levels by the summer of 2013 as a large South American crop is harvested.  

August 2013 futures prices are nearly $.60 lower than March 2013 prices. Further price reductions are expected into the fall of 2013 as a larger U.S. crop is harvested.

November 2013 futures are about $0.85 below the price of August 2013 futures. Still, the prices of both commodities for delivery in the 2013-14 marketing year are well above the levels prior to the drought of 2012.

“Corn prices are being supported at relatively high levels due to a combination of production uncertainty and uncertainty about whether the rate of consumption has slowed sufficiently,” Good said.

The USDA’s December Grain Stocks and Annual Crop Production reports to be released on Jan. 11 will provide more clarity about the rate of domestic feed and residual use of corn and the availability of U.S. corn for the remainder of the current marketing year.

“Those reports are expected to reveal a high rate of feed and residual use of corn during the first quarter of the 2012-13 marketing year and a smaller 2012 harvest than previously forecast.

“Production uncertainty, on the other hand, will persist much longer,” Good said. “The potential size of the South American crops will be clearer by February. Current concerns are focused on the impact of extremely wet conditions in parts of Argentina. Prospects for the U.S crop will not be cleared up for several months,” he said.