2012 could be a really good year for corn producers or a really bad year for corn producers. Livestock producers, who buy corn, will see the flip-side of either the good or bad scenario.
"There are tight corn fundamentals going into 2012, and the stocks-to-use ratio, currently at 6.69, is in dangerous territory," says Sterling Liddell, vice president of food and agriculture programs at Rabobank, based in St. Louis, Mo. Globally, he says, the corn stocks-to-use ratio is 14%, but that’s as tight as it has been for the past eight or nine years.
2012 corn prices will likely depend on the weather, both here and in South America, and whether Europe can come out of its debt crisis. If Europe doesn’t recover and the prospects aren’t good, it could negatively impact China, which is Europe’s largest trader. And if that happens, China could slow its imports of corn and soybeans as its supply of foreign currency dries up.
Still, assuming that trade domino effect doesn’t happen this year and normal weather prevails in the U.S., Rabobank economists are projecting $6.25/bu. corn futures prices in the first quarter of 2012, $6.45/bu. futures in the second quarter and prices trailing off to $6.10/bu. in the fourth quarter. Soybeans will likely trade in the $12/bu. to $12.60/bu. range.
On the other hand, if 94 million acres of corn are planted this year and yields average 157 bu./acre, some analysts suggest, U.S. corn prices could fall below $4/bu. Rabobank estimates that the typical cost of production for corn ranges from $4.30/bu. to $4.90/bu. in the Midwest.
Liddell’s recommendations for corn growers:
- Protect the downside on new-crop corn.
- Look for price-setting opportunities.
- Expect basis volatility, especially around planting time this spring.
- Also expect weather volatility, take advantage when you can, and err on the side of protecting margins.
Liddell spoke during a technical session at the 2012 Top Producer Seminar in Chicago.
See all of the news, photos, videos and more from the 2012 Top Producer Seminar in Chicago, Ill.
- March 2012