The corn market has gained 20 cents from the $1 crash early this month, and if the market shows more life, have your trigger finger ready. "If you haven’t priced any new crop corn, consider selling at $5 cash prices (about $5.50 futures, minus basis)," says Jim Hilker, ag economist at Michigan State University. Harvest prices could easily be $4.20, he adds.
Hilker forecasts a 2013/14 season average price of $4.60. USDA is using $4.80, but that assumes a significant amount of sales made before the price crash.
That said, Hilker is more optimistic about prices for the 2013 corn crop than some analysts. He looks for yields no higher than 159 bu./a, about 5 bu./a lower than USDA. That’s nowhere near the yields of 2009-11.
As a result, he’s forecasting a 1.6 billion bushel carryover for this year’s crop rather than the 2 billion anticipated by many. Secondly, he looks for a bigger ethanol and export demand bump than some, stimulated by lower prices. Hilker also is optimistic on the world economy in the upcoming year.
The economist thinks the market knows something. December futures would not be sitting at $5.45 if the market anticipated $4 corn; no way is there a $1/bu. weather premium, he says. "It makes sense to lock in some at $5.45 to $5.50 futures," he says, because also possible the market could break if it’s a perfect weather year.
Moreover, corn’s recent price range has been $5.25 to $5.50, and it’s now trading near the upper end of that range. "Still, I wouldn’t call the 20 cent uptick in prices a recovery." It will take a lot of factors working in tandem to get the market above $5.70, Hilker adds.
One potentially bullish factor could be delayed planting and accompanying lower yields, although it’s still too early to be worried about it, he says. As much as 35% of the U.S. corn crop can be planted in just one week given perfect weather, Hilker adds.
"I have more trouble saying to hold soybeans than corn," Hilker says. "Brazil has a heck of a crop." Moreover, the market learned that even in a year like 2012, soybean yields held up surprisingly well. He thinks $12 cash for new crop soybeans is a good price, and even that would take a rally.
Hilker is looking for an $11.30/bu. average 2013/14 U.S. soybean price. "Beans could be $10.50 at harvest," he cautions. "There is a 40% chance cash prices at harvest will be under $11, or $11.65 futures." Likewise, there is a 30% chance they will be over $12.50, he adds.
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