$3 Corn in 2010?

March 18, 2010 10:05 AM
Corn prices could drop to $3/bu or less if the right conditions play out this year, says Dan Basse, president of AgResources and a keynote speaker at the Professional Dairy Producers of Wisconsin Business Conference in Madison this week.
"The good news for feed users is that global grain stocks are back to the levels of 2001,” Basse says. "We're back to surplus conditions of corn, soybeans and wheat. Grain prices will have decreased volatility and prices if we don't have a weather problem in 2010.
"If corn goes into the ground early or even at normal planting dates this year in the United States, we could see the national average yield hit 170 bu/a and have 2 billion bushels of ending stocks,” he says.
In fact, Basse says corn prices could dip below $3 this year, distillers dried grains could drop to the $80 to $90/ton range, and soybean meal could go to $220/ton. "But if we have a drought, I can't tell you how high prices could go—on corn, $9, or $10 or even $12/bu. So you need to be buying catastrophic insurance,” he says.
The good news for feed users, such as dairy producers, is that the ethanol industry is finally matured and is unlikely to build more corn- and feed-consuming plants. The major risk now from ethanol is whether Congress increases the blend percentage mandate from 10% to 15% ethanol. Even so, Basse says consumers are driving fewer vehicle miles, which in turn reduces the demand for gas and ethanol.
In addition, U.S. farmers are pulling three to four million acres of land out of the Conservation Reserve Program annually. That makes more acres available to grow more corn, soybeans, wheat and forage.
Plus, yield kicks from genetically-modified plant varieties are finally becoming reality. Argentina, for example, increased its corn yield by 20 bu/a this year to record levels. And 20% of the Argentine corn crop was planted to GMO hybrids, accounting for much of that gain, says Basse. All of that extra crop adds to world grain stocks, putting downward pressure on global prices, the Chicago Board of Trade and your local elevator.

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