Market Outlook: Discount Extreme Forecasts

July 30, 2013 10:19 PM
Market Outlook: Discount Extreme Forecasts

Wild estimates have been circulating on where 2013-14 corn prices could end up given everything in play, but it’s wise to discount high and low extremes.

"I give just a 10% chance of $7 corn in the year ahead and a 2% chance for $3.50 corn," says Frayne Olson, North Dakota State University agricultural economist. "Can I make a case for both? Sure, but both are highly improbable."

Olson says corn prices in the marketing year ahead will likely average $5.25 to $5.75 per bushel for the 2013 crop. He’s more optimistic than USDA, whose current price forecast is $4.40 to $5.20. His reason: USDA’s yield forecast of 156.5 bu. per acre is too optimistic.

Olson thinks a 150 to 152 bu. per acre yield is more realistic. "Even so, yields of 150 bu. per acre on 95 million acres will produce a lot of corn," he adds, and it may take years for demand to come back, which can limit big upward price moves.

Jim Bower, market analyst at Bower Trading, says the corn market is quiet, but the linchpin for grain prices is what happens with soybeans during the next month. Harvest for corn and soybeans will be much later than most people realize, Bower says.

Olson characterizes the next decade as several years of $4.50 to $5.50 corn with shorter periods of production problems causing prices to shoot back up to $7 to $7.50, then back down. Olson says volatility is here to stay.

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