(Agrimoney) – It has been a weak year for corn futures, on course to record a second successive annual loss, depressed by a record harvest in the US, where unusually benign weather allowed yields far higher than initially expected.
However, the decline of 4% or so over 2014 is far less severe than appeared likely in October, when futures hit a five-year low of $3.18 ¼ a bushel.
Futures have since recovered by more than one-quarter, as weak values unearthed demand from the likes of ethanol plants, and with some ideas that elevated meat prices have brought a bigger-than-thought response from meat producers too.
Can the gains hold? Or will they mean more plantings than had been feared in 2015, bring fresh pressure on prices?
Commerzbank
“Prospects for the future that have recently given the corn price a lift.
“On one hand, lower harvests are to be expected for Brazil and Argentina because the cultivation of soybeans is still more attractive.
“But especially in the US the shift from corn to soybeans will probably continue in the next season. For the first time since 2010, fewer than 90m acres could then be cultivated with corn.
“And this would come at a time when demand is rising for feeding – high livestock prices amid still-low feed prices give an incentive to expand the herds – and due to the higher profitability of US ethanol production.
“In all, we expect that the market balance in corn will at least tighten significantly in 2015-16. This prospect ought to cause prices to rise.”
Gulke Group
“It is interesting that some former negative commodity trading advisors are now rather friendly as they finally see US 2014 harvest results north of a Route 20 east-west line as not meeting expectations.
“Others are singing the same tune – to sell rallies, as expectations are that US farmers will reverse their plans and perhaps plant more corn, not less.
“The decision not to sell three months ago was an easy decision – not so easy now.
“However, the ridiculous, unjustifiable reluctance for seed/fertilizer suppliers to hold fast to 2014 prices has slowed or completely stopped application of fall fertilizer or the purchasing of seed for 2015.
“We can solve the high input cost of corn by reducing acres.”
Morgan Stanley
“Though demand is unlikely to provide a near-term floor for prices, negative 2014 production revisions and the prospect of further acreage losses in 2015 should prove supportive in the coming months.
“With US stocks-to-use poised to tighten in 2015-16, corn prices need to hold their ground to protect 2015 acreage from further switching to soybeans.”
Rabobank
“Corn prices are expected to slightly increase over the course of 2015.
“With the robust increase in stocks [in 2014-15], long-term storage is likely to return as the key merchandising/farmer marketing strategy. The history of seasonal cash basis portends good potential for profits as cash prices strengthen from harvest lows.
“Northern hemisphere spring planting is the next critical factor for corn prices. The soybean-to-corn price ratio has been persistently above 2.7, which is significantly higher than the average national breakeven point of 2.35.
“Given the growth in corn stocks and strong likelihood of substantial storage, the ratio is expected to drive prospective planting estimates to favour soybeans over corn. We expect US corn planting to be down 3m-4m acres in 2015-16.
“With corn planting as low as 88.3m acres, the probability of increasing stocks year-over-year is small, which has the potential to drive a $0.20-0.40 a bushel premium back into the spring Chicago futures price.”
Societe Generale
“Looking ahead to the next South American crop, we note that the Brazilian main-season corn crop is in largely good shape.
“Questions surround the safrinha crop to be planted after the soybean harvest. Currently, estimates are wide from flat year-on-year acreage to a reduction of nearly 40% year on year.
“Rising Chicago corn prices and a falling real have recently helped to improve production margins in Brazil.
“With the July 2015 forward hovering near $4.00 a bushel, as of writing, most farmers there can expect to breakeven or make a small profit. If this dynamic continues, the reduction of acreage may not be as dramatic as currently expected.
“At current levels, we see the market fairly valued and absent any dramatic supply shock, see prices normalising around the $4.00 a bushel mark for the near- to-medium term.”
University of Illinois
“Feed and residual use of corn will get a boost from low feed prices and increasing livestock numbers, but US corn exports face more competition than a year ago.
“Some reduction in US corn acreage in 2015, coupled with a return to a trend yield, would result in a much smaller crop and a reduction in stocks during the 2015-16 marketing year.
“After averaging close to $3.50 during the 2014-15 marketing year, corn prices are expected to rebound to the low-to-mid $4.00-a-bushel level next year if production declines as expected”
