(Agriculture.com) – For many corn and soybean farmers 2015 looks like a money-loser but at least the price trends on corn seem to be heading up again.
In a nutshell, that’s the key message from University of Illinois economists who kicked off a week of “2014 Illinois Farm Economics Summits” in their state in DeKalb on Monday.
Officially, veteran fundamentals analyst Darrel Good looks for corn to average about $3.50 a bushel in the current marketing year that ends next August. But Good thinks it’s possible that on January 12 key USDA reports on grain stocks and the final number for planted acres of corn will boost that price slightly.
“I’m thinking $3.60 or $3.70 is probably a better average that we can expect this year,” Good told farmers Monday.
Part of that increase could come from a reduction in 2014 planted acres of corn. The latest number for corn acres farmers reported to the Farm Service Agency –– 86.3 million –– is still more than 4 million below the 90.9 million acres last reported by USDA’s National Agricultural Statistics Service.
Good thinks that will narrow and if it’s closer to the FSA number, USDA’s number for corn production will be slightly smaller on January 12. The stocks report could also show more feed and residual use.
“When we have a big crop and low corn prices, we tend to use more than you would expect,” Good said.
All of that means that Good’s short-term outlook is, as he put it, “not wildly bullish but steady to higher corn prices.”
For the 2015-16 marketing year, Good’s corn balance sheet projects an even higher farm-level national average price of $4.20/bushel.
That’s because he expects a slight drop in corn acres, down by 1 million to 89.9 million, and slightly better than trendline yields averaging 164 bushels an acre instead of this year’s record 173.4 bushels. That would result in ending stocks of corn next year at 1.66 billion bushels, lower than nearly 2 billion bushels this year.
Good doesn’t look for a big increase in either corn exports or ethanol production next year, but his projection for ethanol use shows the industry buying 5.4 billion bushels again next year, up slightly from 5.38 this year.
Although domestic use of corn for ethanol isn’t likely to change much, “we are a bit concerned about ethanol exports moving forward because of the crash in crude oil and gasoline prices,” Good said.
The rapid growth of corn used for ethanol, from about 1 billion bushels a year a decade ago to the current use of about 5 billion bushels, was one of the reasons that Good and fellow University of Illinois economist Scott Irwin projected that corn prices had reached a new long-term average of about $4.60 a bushel back in 2007.
“Darrel and I took a lot of heat when we put that out as being wildly optimistic,” Irwin said Monday. “We were too low.”
“We actually underestimated the average for the last eight years,” Irwin said. It has been $4.87 a bushel.
