A Positive Outlook for Corn Prices
Published: Friday, September 18, 2020
Rising corn prices, driven partially by higher exports particularly to China, are forecast by USDA in the coming months.
The projection was viewed as a welcome surprise to Jim Mintert and Michael Langemeier, agricultural economists at Purdue University, who hosted a webinar on the outlook for crop prices at the West Lafayette campus.
"This is good news compared to where we were a month ago," Langemeier said.
Corn prices were down to $3.10 per bushel in August.
USDA is forecasting the per-bushel price of corn to hit $3.50 based on fall yield estimates being lower than originally forecast and projected exports for the 2020 crop at 32 percent above predictions a month ago.
Another factor is USDA projecting the amount of U.S. corn used for ethanol production in fuel increasing to 5.1 billion bushels this year from 4.6 billion bushels last year.
Mintert, though, said there is reason to doubt if corn production for ethanol will attain USDA projections.
He said demand for corn used to manufacture ethanol dropped 50 percent after stay-at-home orders issued in response to COVID-19 resulted in people driving less.
Mintert said ethanol demand made a strong recovery as COVID-19 restrictions were loosened, but for the past few months has remained at 15 percent below a year ago.
"I continue to think that might be a little optimistic. For them to be right, I think we're going to have to see a bigger recovery after the first of the year," he said.
"I thought we'd see more improvement than that," Langemeier said.
Also good news for prices is projected corn production being 2 percent less than what USDA predicted earlier because of adverse weather conditions like drought late in the summer.
Lower than expected production could help make a noticeable drop in year-ending stocks for corn, which some experts predicted early on at 21 percent.
"Reduction in production and increased usage is a move in the right direction," Mintert said.
Mintert said it's possible for corn to reach $3.60 per bushel if exports, yields and usage for ethanol rise above current projections.
"I don't think that's likely, but it's possible," he said.
Soybean prices also appeared to be on an upward trend with futures prices up roughly 18 percent because of similar factors like higher exports to China and yields forecast by USDA being slightly lower than originally projected.
USDA estimates show heavy losses in corn and soybean production in Iowa but only modest losses in Indiana and Ohio.
Kentucky and Minnesota are among the areas where corn and soybean production is expected to set records.
Mintert said there are indications demand from China is driven mostly by the country attempting to rebuild its pork industry decimated by African swine fever since 2018.
He said ending stocks for soybeans could dip to 10 percent, which would be a noticeable drop from the 23 percent and 15 percent carry- over the past two years.
"That could tighten more if the yields are not as good as USDA expects," he said.
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