Wednesday, December 5, 2012

Continued Support for Corn Prices

Corn prices peaked in August, moved sharply lower in September, and have been in a sideways pattern over the past two months. Within that sideways pattern, prices have moved higher over the past two weeks, with March 2013 futures trading within $0.10 of the post-September high. The recent rally has been fueled by some supply concerns and more optimism about near-term demand.

There are two concerns about potential supply of corn in 2013. First, the on-going wet weather in Argentina may reduce the magnitude of planted area of corn relative to intentions. Fewer acres would threaten the projected rebound in production. The USDA has forecast the 2013 harvest at a record 1.1 billion bushels, a third larger than the drought-reduced harvest of earlier this year. The USDA will update the forecast in the monthly World Agricultural Production report to be released on December 11, but a large change in that forecast is not expected this early in the season. During last year’s drought, the forecast of production was not reduced in December, but was reduced sharply in January and again in February. The potential implications of wet weather on acreage and yield are even more difficult to discern than the implications of drought conditions.  <Read More>