Wednesday, May 9, 2012

Weekly Outlook - Corn Prices in Three Parts

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>

No comments: