More Upside for New Crop Corn

April 21, 2011 08:48 PM
More Upside for New Crop Corn

The upside is far greater than the downside potential for the 2011 corn crop. Both futures and farm prices are likely to remain far above historical averages, although somewhat below recent highs of $8/bu. for old crop corn, says Jim Sullivan, Informa Economics senior vice president. He spoke last week at his organization’s policy conference in Washington, D.C.

“I look for the average futures price to be $6.30 and an average farm price of $5.85/bu. for the upcoming year,” Sullivan says.
Moreover, corn’s profitability has surged ahead of soybeans. In early March, corn enjoyed a $135/acre profitability advantage over soybeans for the 2011 crop. By April 11, that had increased to $200/acre, Sullivan says.

Evident Ethanol Impact

The reason for corn’s increase in profitability can be summed up in one word: ethanol. Now both feed and ethanol take up 39% of the corn crop. Sullivan says that because corn’s anticipated use exceeds production based on the March 31 Acreage Report, additional acres are likely to shift to corn this spring. “Looking at corn’s balance sheet, there is not an adequate supply of corn. As long as the stocks-to-use ratio is below 10%, the market is not satisfied.”
Soybean prices as well will enjoy more upside that downside risk, Sullivan says. He forecasts futures prices of $13.50 for new crop beans, and just shy of that, $13 even, for the new crop soybean farm price average for 2011.


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