November 3, 2004

 

 

Corn prices in US States May Hit 1999-2001 Levels

 

Yields in some upper Midwest states in the US have been affected by frost damage in late August and early October. But farmers have harvested huge corn and soybean crops in the rest of the country, according to Robert Wisner, Iowa State University marketing economist.

 

Thus low prices similar to 1999 to 2001 levels could be seen for the next several months, although corn prices have significant upside potential in the spring, Wisner stated.

 

"US corn carryover stocks are likely to be more than double last summer's level, and the largest in about 25 years," Wisner said. "Soybean carryover stocks are likely to be nearly four times as big as last summer's low carryover, and the largest since the late 1980s, provided South American yields return to normal next spring. The very large US crops will provide plentiful supplies of low cost feed grains and soybean meal for the next several months.''

 

Wisner expects corn prices to increase modestly from mid-December to spring planting with upper Midwest cash prices likely to be 20 cents to 25 cents above current levels by planting time.

 

"US weather concerns or a sharp decrease in Chinese corn exports could bring additional price strength,'' Wisner added.

 

Potential for corn prices to rise are fueled by large domestic demand created by rapidly expanding processing for ethanol fuel as well as expectations for growing export demand.

 

Prospects for significantly larger carryover stocks than in recent years, ho-hum export sales performance this year and much improved crops in several foreign areas will likely temper price strength, Wisner said.

 

Soybean meal prices are likely to be strong into mid-winter with the market responsive to any serious South American weather concerns, Wisner said.

 

If South America avoids major weather problems, there could be some weakness in soybean meal prices in late February and March.

 

Dairy farmers who have storage and need to buy corn for feed should fill the bins this fall, Wisner said, but the corn should be purchased soon. Incentives for forward contracting soybean meal look much smaller than last year.

 

"Look for late winter, spring 2005 crop pricing opportunities,'' Wisner said.

 

He advises watching weekly export sales reports. Corn exports need to be 1.3 to 1.5 million tons per week for three to four months.

 

At this point, Wisner is projecting an Iowa average corn price of $1.95 per bushel for 2004 to 2005. The average harvest price for north central Iowa would be $1.65 per bushel.

 

His soybean projection for 2004 to 2005 is an Iowa average price of $4.90 per bushel with a north central Iowa average harvest price of $4.70.