Corn prices have recently moved in three distinct patterns.
These include the patterns for new crop futures, old crop futures, and old crop
cash prices.
December 2012 futures reached a high of $6.735 on August 31,
2011and declined erratically to the current low of $5.15. The decline since the
third week of April totaled about $.50. Continued weakness reflects a
combination of large crop expectations and demand concerns. The early planting
season along with non-threatening weather conditions to date have created
expectations for an above-trend yield in 2012. In combination with large
acreage, yield expectations point to a crop well above 14 billion bushels. New
crop demand concerns are in two categories. First, the delayed and likely slow
implementation of 15 percent ethanol blends in the U.S. fuel supply point to
stagnating corn consumption in that category next year as the E10 blend wall
rapidly approaches. Second, the European debt crisis, a slower pace of economic
growth in China, and the slow pace of job creation in the U.S. dampen commodity
demand expectations for the year ahead. The one bright spot may be a larger
export market for U.S. corn as the USDA has recently announced large sales to
both China and “unknown” destinations. Conditions currently point to a
substantial build-up of U.S. corn inventories next year and increasing
expectations that prices will return to the lower averages experienced in the
2007-08 through 2009-10 marketing years. Average prices received by farmers in
that three year period averaged just under $4.00. <Read More>
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