January 3, 2014

US 2014-15 corn price prospect to decline, soy to rise

Due to large US and/or world crops in 2013, corn prices have come under the most pressure while soy prices have remained higher due to strong demand, particularly from China.

Driven by a huge US corn crop in 2013, a substantial decline in prices has been experienced and will result in an increase in consumption during the current marketing year; however, inventories will still be much larger by year-end. High corn prices have resulted in a 45% increase in corn production in the rest of the world since 2005, providing prospects for on-going competition for US corn. In addition, the era of rapid growth in ethanol production has passed. A small decline in US acreage and a trend yield would result in a US crop near 368 million tonnes in 2014, allowing a further build-up of inventories next year. Prices are expected to average in the low- to mid-US$4 range for the 2013-14 marketing year and in the low US$4 range in 2014-15.

Meanwhile, both South America and the US had large soy crops in 2013, resulting in some moderation in prices. However, on-going strong soy demand from China will prevent a sharp build-up in inventories and has kept prices at generally high levels. Another large South American harvest is expected in 2014. A modest increase in acreage and a trend yield in the US would result in a record large US crop in 2014. If production unfolds as expected, inventories will expand during the 2014-15 marketing year, resulting in further price declines. An average farm price near US$12.75 is expected for the 2013-14 marketing year and in the US$11 to US$12 range for the 2014-15 marketing year.