The odds are against four-dollar cash corn this year and next, at least for any extended period of time. The monthly average cash price paid to farmers in the United States for their corn has been less than $4.00 a bushel for 27 consecutive months. University of Illinois Agricultural Economist Darrel Good says unless something changes it’s likely to stay that way well into 2017.
“Some combination of a reduction in supplies or increase in consumption will be required in order for prices to move back above $4 for an extended period of time.”
USDA issues another crop production report next week (November 9th) and it will forecast the size of the 2016 U.S. corn crop. Previous history of yield forecast changes in November in years when the forecast declined in September and again in October as was the case this year, shows very mixed results. The trade is leaning toward a smaller corn yield this time around so, not a lot of supply side help is expected from the USDA reports on this fall’s crop. Good says that makes the southern hemisphere pivotal.
“Brazilian production declined sharply in 2016 and early season USDA projections are for production to rebound to near the level of 2015 during the year ahead,” he explained. “In addition Argentina is expected to expand corn area due to reductions in export taxes.”
It is too early in the South American growing season to assess yield potential, but production well below early projections would be required to push corn prices higher and Good also thinks a more likely source of a reduction in corn supply may be reduced corn acreage in the United States next year.