The USDA’s November forecasts of the size of the 2012 U.S.
corn and soybean crops were larger than expected, particularly for soybeans. As
a result, the general downtrend in soybean prices since mid-September has
accelerated, with January futures now at the lowest level since June 29. Corn
prices have moved into the lower half of the trading range that has been in
place since mid-September and December futures are at the lowest level since
September 28. So far, prices seem to be following the classic pattern
associated with small crops –peaking early in the marketing year and then
declining as the year progresses.
The futures market reflects expectations that prices will
continue to decline, especially into the 2013-14 marketing year. The expected
rebound in South American soybean production, Argentine corn production, and
U.S. corn and soybean production in 2013 all contribute to the expectation of
lower prices. If those crops are as large as generally expected, prices will be
even lower than currently reflected in the futures market. The USDA is
forecasting record South American production of both crops. If planted acreage
of corn in the U.S. in 2013 is at the same level as in 2012 and the U.S. average
yield is near a trend value of 162.5 bushels, the crop would total 14.6 billion
bushels, about 1.5 billion larger than the record crop and record consumption of
the 2009-10 marketing year. <Read More>
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