January 12, 2012

 

 

Max Runge, Auburn University Extension economist, said that corn prices in 2012 may not be as good as the past year, but prices still will be pretty good.

 

Runge presented the market outlook at the recent Central Alabama Corn Production Meeting held in Autaugaville.

 

US corn and soy production was the smallest this past year than it has been in three years, he says. "Our wheat crop was the smallest in five years. We don't know yet if that is good or bad news. Foreign production hit a record high, so that's hurting our export markets a little. Some of the indications are that 2012 corn acreage is going to be up, and there are some other factors impacting the market."

 

The underlying factor may be weather, says Runge, and this past year it depended upon where you were located. Southeast Alabama was almost a total disaster, the Tennessee Valley was good, and west Alabama was mixed, he says.

 

"The drought outlook from December 2011-February 2012 shows the drought will persist or intensify in the Southeast. Weather forecasts are not always accurate, but if they are right, we need to be aware of the possibility."

 

As of now, for some areas of Alabama to get back to normal moisture levels, about 30 inches of rain would be needed or 120 to 125% of normal amounts, says Runge.

 

"Most of the mama cows in the US are in Texas and Oklahoma, and since they've had such a severe drought, they've had to get rid of some of those cows. A lot of the corn in the US goes to feed cattle, but there are fewer cattle out there. Most of our corn doesn't necessarily go to feed cattle, but it goes to feed chickens. There will be some lingering effects to the drought" he says.

 

In Alabama, the eastern region and the south eastern corner were hit hardest by drought. In Georgia, the southwest quadrant, where most of the agriculture is located, was affected.

 

Corn consumption, from 1995-2011, has increased, says Runge. "Exports have stayed fairly steady. Food, seed and industrial uses of corn, including ethanol, has increased markedly. Not that long ago, 5% of US corn production was going to ethanol. Now, we're up to almost 40% going to ethanol production. Is that good or bad? It depends on whether you're buying or selling corn. If you're growing and selling corn, it's probably not that bad. If you're trying to buy corn to feed, it's not good."

 

Unless something changes, he adds, this situation will remain. "Ethanol usage was supposed to be 12 billion gallons back in 2010, up to about 14.5 billion by 2015, and then 15 billion starting in 2016, and that's only five years away."

 

Corn world ending stocks continue to fall, he says, due to weather problems and demand. Looking at commodity prices from a year ago, corn hasn't changed much, he says. Soy was about US$1 higher, and cotton was about US$0.14 higher a year ago.

 

"But input costs are going up. Nitrogen, phosphorus and potassium all will be going up. The good news is that we're not as bad off as at the end of 2008. That's when commodities ran up and inputs went up along with them."

 

Runge advises growers to look at and price nitrogen. About 55% of our nitrogen is imported and 81% of potash comes from overseas, he says. The US has about 90% of the world's supply of phosphate, exporting 44%.

 

"The good news is that chemicals haven't gone up too much and are holding fairly steady. Seed prices will be up some this year and peanut seed is expected to be up quite a bit."

 

This past year, marketing on corn was flat throughout harvest, so it didn't really matter when you marketed, he says. By September 2011, it was on a steady increase.

 

"You would have been in pretty good shape if you have sold some at planting, some during the growing season, and some at harvest. I don't think prices this year will get much lower than where they are now."

 

At 120-bushel corn, the break-even cost is about US$4 per bushel, on irrigated cropland, says Runge. "There's an opportunity, at 120 bushels, to see a little profit on corn." Crop rotation is very important, he says, and it is even more important now.

 

"There's isn't a big problem yet with herbicide-resistant weeds in parts of Alabama, but it is coming. The Tennessee Valley has it, southeast Alabama has it, and it'll be moving in. Rotation will help, so you can change the chemistries with the crops you're planting."