Editor's Note: AgWeb.com is taking a look at experts’ projections for a variety of commodities in 2013. See the full list of outlooks.
It will be a relief for many corn farmers to turn the calendar to 2013. One of the toughest production years in history was coupled with an extremely jerky and volatile market.
So, what lies ahead for next year? Jerry Gulke, president of Gulke Group and Top Producer Columnist, and Bob Utterback, president of Utterback Marketing and Farm Journal Economist, share some insight.
#1: Will corn steal or lose acres next year?
In 2012 U.S. farmers planted 96.4 million acres of corn – the largest corn crop since 1937. But extreme drought conditions destroyed the crop’s yield potential. As of its latest Crop Production report, USDA estimates total corn production to be 10.7 billion bushels, down 13% from 2011 and the lowest U.S. corn production since 2006.
Will farmers do an acreage repeat in 2013?
"We talk about planting mixes, but in the Midwest, at least, we like to plant corn," Gulke says. He’s says there’s a possibility of another 1 million acres being planted to corn next year, which would total nearly 100 million indented acres. Areas, such as the Dakotas, received such high corn yields this year, so Gulke believes they will definitely want to plan corn again this year. "You’re not going to bury those corn acres."
Utterback is not so sure farmers will jump on the corn bandwagon again. He believes acreage shifts will happen in certain regions, depending on agronomic issues, such as fall moisture, crop rotations and fertilizer.
"When you look at the total number, I think we will be hard-pressed to reach the same corn acreage numbers as 2012," he says. "The only way you’ll see it is if we have exceptionally good planting conditions in the spring or if the bean market gets hammered."
#2: Could bad weather prevail three years in a row?
In 2011, a wet spring and scorching July trimmed crop yields, and then yields were dramatically hindered in 2012 by prolonged dry and hot conditions. It took both of these big, bad weather events for us to see extremely high prices, Utterback says.
Another excessively dry or wet season in 2013 will either support or crash prices. "The biggest mover of the market for grain is weather," he says. "If we get good weather, the markets are going down, if we get bad weather, the markets will go up."
Gulke says crop mixes and prices next year will all boil down to weather. A silver lining to the drought, he says, is farmers were likely not totally shaken by this year’s challenging growing year. Gulke, who farms himself, says he now knows his worst-case scenario for corn yields. "I can grow 80-bushel corn, come hell or no water. So, that tells me that my risk, if I watch my management practices, is pretty low."
#3: Does anybody out there still want our corn?
As the drought reduced the supply side of the corn equation this summer, more and more focus was put on demand. Did the record-high prices destroy domestic and global demand?
"The demand side of the equation is really muddy," Utterback says. "Since 2001, we’ve had a positive demand-building phase because of ethanol. But we know now that with the change in government policy, I think you could argue that the domestic growth in corn demand has peaked."
Utterback believes ethanol demand will take on the characteristic of the feed market, in that it will become more predictable. "Obviously these demand sources can still shift, but they won’t have the year-to-year solid growth."
#4: Will the entire world plant more corn?
"We’ve become a global market in corn," Gulke says. "We’re not the only ones to buy corn from anymore. Now what happens in the Ukraine or Argentina are important."
He says $8 corn in the U.S. attracted global attention and increased production. Worldwide demand is growing and other key countries are joining the U.S. in being major corn suppliers. "This isn’t all about the U.S. Corn Belt anymore," Gulke say.
#5: Are prices on a new plateau or a cliff?
Prices peaked at all-time highs this summer, with corn surpassing $8 and soybeans topping $16. They have since settled lower, but are still at impressive levels.
"I’m not so sure if we haven’t moved to a new plateau for prices," Gulke says. "This year, we determined what the worst case is for yields and prices. We know how bad it can get before we lose more than 10% of our demand."
He says there isn’t a lot the industry can do with $8 corn, $16 soybeans in the long term except provide an incentive for the rest of the world to grow more. "If a global surplus evolves, we’ll find out if $4 corn or $12 soybeans are cheap or not. There isn’t another ethanol-like expansion of usage of corn lurking in the background, to consume a large expansion in the short term. The potential volatility points out the critical need to remain flexible in thinking and marketing."
The hazard for farmers in 2013 is thinking that these high prices are the new norm. "We have fallen in love and think this is a whole new level of existence. Look at the last five years of prices; it wasn’t too long ago that we had $5 corn prices," says Utterback. "Farmers should not convince themselves that corn markets only have one direction to go."
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Read Utterback’s Farm Journal "Outlook" columns