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Are corn prices headed up?

published: July 18th 2019
by: John Kruse
source: University of Missouri Extension

The outlook for corn prices is more positive because corn is likely to experience a significant downward supply shock. Not only will planted area be reduced, but the yields will also likely be significantly lower.

Suppose only 85 million acres of corn are planted, and yields fall to 170 bushels per acre. Adjusting for 92% harvested leaves a crop size of 13.3 billion bushels, down 1.7 billion bushels from the U.S. Department of Agriculture’s May production forecast. A similar production estimate can be obtained with 87.5 million acres planted and 165 bushel-per-acre yields. The 1.7 billion bushels of lost production would likely push the farm price up to $4.15 per bushel and corn prices at the Chicago Board of Trade to nearly $4.50 per bushel. Continued speculation on the production impacts from delayed planting will likely keep the market volatile and will likely present some marketing opportunities for those who have been able to plant this year. Market participants have already pushed the March 2020 corn futures above the $4.50-per-bushel level.

May 2019 U.S. corn supply and use update
  2017/18 2018/19 2019/20 2020/21
  Units WASDE WASDE WASDE FAPRI % change from
2019/20
Area planted mil ac 90.2 89.1 92.8 92.7 -0.1%
Area harvested
 
mil ac
 
82.7
 
81.7
 
85.4
 
85.2
 
-0.3%
 
Yield
 
bu/ac
 
176.6
 
176.4
 
176
 
175.9
 
-0.1%
 
Beginning stocks mil bu 2,293 2,140 2,095 1,629 -22.2%
Production mil bu 14,609 14,420 15,030 14,982 -0.3%
Imports mil bu 36 35 35 38 9.7%
Total supply
 
mil bu
 
16,939
 
16,595
 
17,160
 
16,650
 
-3.0%
 
Feed and residual mil bu 5,304 5,300 5,450 5,378 -1.3%
Food, seed and industrial mil bu 7,056 6,900 6,950 7,247 4.3%
Ethanol and byproducts mil bu 5,605 5,450 5,500 5,756 4.7%
Total domestic use
 
mil bu
 
12,360
 
12,200
 
12,400
 
12,624
 
1.8%
 
Exports
 
mil bu
 
2,438
 
2,300
 
2,275
 
2,325
 
2.2%
 
Total use
 
mil bu
 
14,799
 
14,500
 
14,675
 
14,950
 
1.9%
 
Ending stocks
 
mil bu
 
2,140
 
2,095
 
2,485
 
1,700
 
-31.6%
 
Farm price $/bu 3.36 3.50 3.30 3.82 15.8%

FAPRI projections as of March 2019

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