With strong corn prices, a good argument can be made for almost any marketing decision. “Like I’ve been telling farmers, it’s hard to make a bad marketing decision,” says Chad Hart, Iowa State University ag economist. He made the comment after USDA’s Sept. 12 Crop Production report, which reduced projected yields in line with trade expectations. Hart forecasts a season average price for the 2011 crop of $7.25 to $7.30, which compares to USDA’s $6.60 to $7.50.
The biggest wild card is whether the economy will see a double dip that could make prices drop next spring. It happened in 2008, after the recession kicked in, Hart recalls. Both the U.S. and European economies are treading on tenuous ground, which gives him some caution. That said, Hart gives a double dip only a 10% chance, which nonetheless is a risk that producers who hold their crop for later sale should consider.As expected, USDA cut this year’s corn production
in its Sept. 12 report. The department’s latest yield estimate represents a 3% or 4.9 bu. per acre decline from the August forecast and would be the lowest U.S. corn yield in six years.
In total, USDA forecasts corn production of 12.5 billion bushels for 2011—also down 3% from August, but it still would be the third highest corn crop on record. “I’m waiting for the other shoe to drop, and that’s harvested acreage estimates,” Hart says. In his view, USDA’s forecast of just under 84.4 million corn acres harvested might be on the high side, given the number of acres lost this year to drought, floods and other corn-growing calamities. He thinks USDA might bring the acreage number down in forthcoming reports, and as a result, total production will end up in the 12.2 billion to 12.3 billion bushels range.
Marketing this year depends in part on producer location. Economist Dan O’Brien of Kansas State University cautions his state’s farmers against doing so much forward pricing that they turn from hedgers into speculators. That’s because of the short crop caused by the severe drought in the Southern Plains.
One number that jumped out at O’Brien was the 5.3% ending stocks estimate for this fall, which was included in the USDA’s World Agricultural Supply and Demand Estimates, also released on Sept. 12. He thinks there is a chance, though it won’t be known until next year, that stocks could dip below 5%, which would be a record low. In order for it to stay at 5.3%, USDA assumes a rationing of demand, including exports, feed and residual uses, and ethanol. USDA economists cut corn demand by 400 million bushels in the September report.
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