University of Illinois agricultural economist Darrel Good indicated this week at the farmdoc daily blog (“Corn Price Strength Continues”) that, “March 2015 corn futures traded to a high of $4.115 on December 15, the highest level since July 10 and $0.80 above the low reached on October 1. The average spot cash price at South-Central Illinois elevators was reported at $3.785 on December 12, $1.01 above the low on October 1.
“A number of factors have contributed to the strength in corn prices over the past six weeks. First, the USDA’s October and November production forecasts were well below the expectation of nearly 15 billion bushels that was being widely discussed in early October.
A second supportive factor comes from prospects for corn consumption that have improved modestly since September. The USDA now projects 2014-15 marketing year corn consumption at 13.67 billion bushels, 65 million bushels above the September projection. The recent pace of consumption in some categories, however, has been above the average rate projected for the year. That pace has contributed to the post-harvest strength in both futures prices and basis levels.”
After additional analysis, yesterday’s farmdoc update stated that, “The pace of corn consumption for ethanol production and the magnitude of export sales suggest that consumption for the year in those categories will reach, or perhaps exceed, the USDA projections. Substantial uncertainty about the magnitude of feed and residual use of corn will persist until the release of the USDA Grain Stocks report on January 12.
“A third factor that may have contributed to the more recent strength in corn prices is speculation that the USDA’s production estimate to be released on January 12, 2015 may be smaller than the current forecast of 14.407 billion bushels. Expectations of a smaller production forecast reflect, in part, modest yields reported for late-harvested corn in parts of Iowa and the northern Corn Belt. In addition, the corn market is revisiting the issue of the magnitude of planted and harvested acreage of corn this year. Questions about the accuracy of the current USDA National Agricultural Statistics Service (NASS) forecasts of planted and harvested acreage stem from the small corn acreage relative to NASS acreage forecasts that had been reported to FSA through November. This was discussed in detail in the November 17 issue of this newsletter.”
Yesterday’s update concluded by noting that, “The January 12 USDA stocks and production estimates will settle much of the uncertainty about 2014-15 marketing year corn supplies. For now, corn prices are expected to remain firm to slightly higher.”