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Prepare for $2.75 Corn

November 21, 2013
By: Fran Howard, AgWeb.com Contributing Writer
unloading corn harvest 2011
  

The party's over for the corn market, and smart producers are locking in prices well into 2015, says one market analyst.

The boom times have ended. And smart producers are forward contracting their crops and locking in prices well into 2015 to ensure some level of profit.

"There will be a tremendous readjustment that plays out over the next five years," says Dan Basse, president of AgResouce Company in Chicago.

Corn producers have become accustomed to making $200 to $400 per acre above breakeven. Going forward, Basse says, average income over cost levels will land somewhere between a $30 profit and a $30 loss.

"What’s happened is that everyone in the ag industry has had his hand in the farmer’s pocket," says Basse.

Listen in on an AgriTalk interview with Basse:

Fertilizer costs, land rents, machinery and equipment costs have all combined to raise the breakeven on corn to somewhere between $4.35 and $4.85 per bushel, he says.

"The key point is that the cost side is where the farmer is being squeezed," he adds.

Basse expects spot corn prices, Chicago, to drop to $3.50 in 2014, and then to as low as $2.75, possibly lower, by 2015.

While the price plateau for corn is higher than it was before ethanol, it won’t be anywhere near as high as it was between 2005, when the ethanol boom began, and 2012, when corn prices peaked.

"We think the new plateau for corn prices is $2.75 to $5.50," says Basse.

If Basse is right and corn prices fall to predicted levels as yields return to trend levels, land prices are also likely to plunge.

"I don’t know how someone will be able to afford the land rents that people are getting today," he says.

While China could provide a growing demand base for corn, demand from the world’s most populous country won’t be anywhere near as consistent as the demand base that a growing ethanol industry provided the the industry as it built to 13.8 billion gallons, the equivalent of nearly 5 billion bushels of corn.

"We have prepared our clients by selling forward," Basse says. "They are heavily sold this year, 60 to 65 percent sold next year, and 15 to 20 percent sold for 2015 at prices that provide some level of profit. Beyond 2015, I don’t have any advice."

 

More information:

AgWeb's 2014 Marketing Outlooks
The editors at AgWeb.com take a look at experts’ projections for a variety of commodities in 2014 to help you succeed and be profitable in the coming year.


 

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RELATED TOPICS: Corn, Marketing, Analysis

 
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COMMENTS (24 Comments)

Dehli Farms
here are some figures i put togather,seed$100, fert$200 rent $200 chemicals, fuel and other stuff $100, = $600 per acre. sell 200 bu per cre at $3.00 per bu= $600 per acre, pretty hard to buy milk and shoes for the baby.
5:21 PM Jan 30th
 
Dehli Farms
here are some figures i put togather,seed$100, fert$200 rent $200 chemicals, fuel and other stuff $100, = $600 per acre. sell 200 bu per cre at $3.00 per bu= $600 per acre, pretty hard to buy milk and shoes for the baby.
5:21 PM Jan 30th
 
Dehli Farms
i think this year is going to tough, here is some figures i put togathe seed $100, fert$200, rent $200, chemicals fuel and mis $100 =$600 per acre, and if i sell 200 bushel per acre at $3.00 per bushel, that $600 dollars, how can i buy milk and shoes for the baby.
4:52 PM Jan 30th
 
Dehli Farms
i think this year is going to tough, here is some figures i put togathe seed $100, fert$200, rent $200, chemicals fuel and mis $100 =$600 per acre, and if i sell 200 bushel per acre at $3.00 per bushel, that $600 dollars, how can i buy milk and shoes for the baby.
4:52 PM Jan 30th
 
chrisgrains - small point, ME
Always been amazed by the price of corn. We use it for so many things.
9:24 AM Jan 16th
 
wozz - IL
It would be nice to lock in some of the huge profits everyone said was in farming the last few years but there was always something to take it before it went into the savings ccount. Mostly went for Greed on getting bigger and to keep from paying taxes through leverage financing. Locking in a smaller loss is not a profit situation just an excuse to be doing something.Look at the go getters they are still growing till they are told No! www.wrightsimsfarms.com
somehow has failed to tell their 50/50 farms that they are renting ground in 2014 for $ 500.00 HOW CAN THAT BE LOCKED IN ?
5:23 PM Jan 1st
 
PullMyFinger - Chappell, NE
If $2.75 corn is coming the smart producers are selling out now. But not to worry, we've had corn cheap enough to burn before and guess what - it got burned!! That's why corn will NEVER be cheaper than fuel again. If corn dips to $2.75 fuel oil will have to be less than $2, so don't hold your breath.​
11:13 PM Dec 28th
 
cornman - Scott City, KS
We are prepared. The economy won't be.
7:33 PM Dec 14th
 
scout - union beach, NJ
I read this and think we have been at 2.75 corn in the past and it increased demand but what about cotton? We have highs on asia money and China wanting to hoard all the cotton on the open market and you think acres aren't going to move out of corn? A reall corn farmer believes you can make anything out of corn and the price stays up when you have a carry trade and insurance.
6:03 PM Dec 9th
 
scout - union beach, NJ
I read this and think we have been at 2.75 corn in the past and it increased demand but what about cotton? We have highs on asia money and China wanting to hoard all the cotton on the open market and you think acres aren't going to move out of corn? A reall corn farmer believes you can make anything out of corn and the price stays up when you have a carry trade and insurance.
6:03 PM Dec 9th
 



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