Typically when US corn prices fall due to a large crop, world buyers step in to buy US corn at these lower prices. According to Purdue Ag Economist Dr. Chris Hurt, that may not happen with the 2014 crop, “Exports have not been as strong for the new crop as we have seen for the past few years.” He told HAT China has a surplus of corn and may not buy as much from the world market as they have in the past few years. In addition, the world supply of corn is good. “So this is keeping the USDA conservative in their export projections,” said Hurt.
Hurt says the ethanol industry is also not likely to step in and increase demand for corn. He said ethanol profit margins are already good and the caps imposed by the RFS are limiting how much ethanol can be produced. “Bottom line, lower prices do not buy us much more ethanol use,” Hurt said.
Even the livestock sector is not likely to increase their demand for corn. “The PED virus is constraining expansion in the hog industry,” Hurt stated. “The poultry industry is having trouble with expansion and the cattle industry just takes a long time to rebuild.” He added that cattle in feedlot numbers will be down in 2015.
Hurt predicts that demand for US corn will increase, but slowly, over the next 2 or 3 growing seasons, “We will see more livestock production around the world and more grain processing but over time.” He said from now on we will be in recovery mode with demand slowly moving up during the 2015 and 2016 growing season. This assumes, however, that we will have trend line yields for the 2015 and 2016 crops.