US corn prices to increase but wheat and soy fall flat

Prices for the 2009 corn crop are estimated to slowly climb on higher demand next year, but soy and wheat prices have a slightly more dismal outlook.

Corn demand will come from the growing ethanol industry and export sector, according to Purdue University agricultural economist Chris Hurt, adding that with the increased demand, storing the corn crop could be the best pricing strategy.

This year was a record yield year in the US. Price levels will vary by location but it will likely get back above US$4 per bushel at some point. Ending stocks for corn this year for the 2009-10 marketing year could reach 16.5% of annual use.

Ending stocks for soy for the 2009-10 marketing year will likely be around 25% of annual use, so soy prices are unlikely to average higher than about US$10 for the 2009 crop, said Hurt.

Soy stocks will be highly dependent on the size of the South American crop, which is being planted now and will be harvested from March to May 2010. There is anticipation that world soy production will increase by about 1.3 billion bushels, with more than a billion coming from South America.

Stronger US soy prices this autumn have stimulated acreage in South America. The large world soy stock increase will come if yields are normal this year. The problem for South America this past year was drought and low yields for the 2009 spring crop. So soy could very well return to high inventories worldwide at this point, Hurt said.

Higher world inventories will mean soy prices are less likely to increase as the marketing year continues.

US producers should expect the flattest price prospects on wheat due to large global inventory and a surplus in the US. Ending global wheat stocks for 2009-10 marketing year will be about 29%, compared to the ending stocks of 18% when prices were high in 2008.

But there are factors that could turn the analysis around, such as weather problems which could drive up soy and wheat prices. Another consideration is inflation investing, as prices could move higher despite high stocks if inflation investors enter the market and buy soy aggressively.