Farm Bill deadlines. Crop insurance strategies. Planting decisions. Spring may be months away, but the time for making choices that will affect this crop year and beyond is fast approaching. During Allendale’s Annual Ag Leaders Conference Series this week, the McHenry, Ill.-based firm offered its take on what farmers need to know as they consider the 2015 corn market. Here’s what the research firm had to say.
Ethanol: The Party is Probably Almost Over
Ethanol has been a star on the demand stage in recent months. “We are beating the pants off the USDA’s full year goal so far as ethanol,” noted Rich Nelson, chief strategist for Allendale, during the Tuesday webinar. “Now we do know of course these great times aren’t going to last.” Oil and gas prices are dropping, with no clear floor in sight. Ethanol producers are reporting losses of 22 cents per gallon on the biofuel, and stocks are rising. The U.S. is exporting more ethanol, but Brazilian production could cut into that market.
The bottom line? “On a short-term basis, you can expect a slight drop for domestic corn demand,” Nelson said. “On a big picture basis, we have a larger issue to argue with the EPA” regarding the renewable fuel standard (RFS) and ethanol blend requirements.
Livestock: I'm Full, Thanks
Yes, livestock producers have been giving heartier meals to their cattle and hogs, especially as meat prices have soared and grain prices have plunged. But that growth in feed usage is probably tapering off for the year ahead in terms of corn demand, according to Allendale. “I don’t think we’ll have any major increases,” Nelson said.
Seemingly every agricultural-product-producing state in the country is salivating at the chance to sell its rice, wheat, chicken, and more to Cuba. Not so fast, said Nelson. “Cuba is already an established mature market for U.S. corn,” he said, noting how the U.S. has been shipping agricultural products to the island nation since 2001. “Don’t expect this Cuba discussion to have any bearing on 2015 and 2016 as far as prices.”
Prices: Expect Short Term Drops
Ah, prices. With concerns about demand ongoing, Nelson advised farmers to be prepared for some short-term declines in prices. July corn futures are likely to slip to $3.50 for that old crop corn while December futures for new crop corn could jump up to $4.50 this year before sliding back down to $3.75 by the end of the year. “Overall, our numbers on corn are not as bearish as you might expect,” he said. “The long-term situation heading into next year will not be too bad.”
Acreage: Will Soybean Acres Overtake Corn?
Everyone wants to know just how many acres of corn and how many acres of soybeans that farmers are going to plant this spring. “If we talk to 10 different farmers, we’ll get 10 different opinions on what is going to be more profitable to plant this year,” said Nelson, who remains pretty conservative on the acreage question. “I don’t think you’ll see any major switch out of corn” in states like Iowa, Illinois, and Indiana, he said. “For an average producer in a corn-based area that can grow good corn, there’s not a big difference in revenue based on current prices.”
What factors do you think will be most influential on the 2015 corn market in the short term? Share your thoughts on the AgWeb discussion boards.