December 28, 2009

US corn and soy market to stay strong in 2010

 

Continual demand for US corn and soy will help the market to remain firm while production increases.

Corn prices will remain strong due to ongoing robust demand from the ethanol industry. Exports and feed demand will also support corn production, said Chad Hart, agriculture economist from the Iowa State University.

Farmers have been keeping up with the growing demand with an increase in plantings, leading to higher production. The trend of more plants per acre will continue for the next few years, said Hart.

While 2009 has been a record-setting year for yields, with the US average being 163 bushels per acre, it has also been a challenging year for the harvest. There were some quality issues this year and low test weights, but the biggest problem was the slow harvest as this year registered the slowest harvest nationwide since 1992.

The December USDA crop report showed that 8% of the corn crop is still in the field in the 18 highest producing states in the country.

Hart said 2009 was also a record year for soy production, with 77.5 million acres harvested and a US average of 43.3 bushels per acre. The continual demand for soy exports has helped keep the prices up.

China has been a big help to the soy market, and Chinese demand for soyoil has continued to increase, with exports hitting a record of 1,325 million bushels, Hart said. He noted that ending stocks are very low and exports could be even higher next year.

Harvest on the 2009 soy crop was the slowest since 1985, but most have been harvested so far. However, Hart said some soy have mould concerns and low test weights.

Farmers this autumn have been dealing with moisture issues, which also leads to a concern with storage. As the temperature rises, the moisture content must decrease in order to prevent storage concerns, said the economist.

Problems with grain quality will lead to pricing issues as well, and the US crop must be properly stored for future sales due to pressure from other soy producing countries, he said.

The Renewable Fuels Standard (RFS) continues to push production as well, thus there will be continued high demand for grains, especially corn, with producing renewable fuels. Biofuel production is also on the increase, but most production plants are not running in full capacity.

By 2015, five billion bushels of corn will be needed by the ethanol industry in order to meet the standard. This will also continue to push corn pricing. The continual rise in grain prices has also continued a decrease in livestock numbers and a decline in the demand for feed.

Hart said 2010 will be another record year, with 89 million acres of corn to be planted, up 2.5 million acres from 2009. He expects 76 million acres of soy to be planted. As a result of increased corn and soy plantings, wheat acreage will likely lose 56 million acres.

Hart predicts prices to stay strong as well, with soy prices averaging US$9.20 per bushel and corn averaging US$3.55 per bushel.