U.S. corn production predicted to be up, displacing other crops
Rabobank’s economists forecast corn futures falling by 24% from the lofty level of $7.90 per bushel in first quarter 2013 to average $6 by the fourth quarter. Despite the bearish outlook, the beginning of the year will see strong prices to encourage further demand rationing in the U.S. "The transition from second quarter 2013 to the third quarter will be the most volatile period of the year as the U.S. corn complex transitions from a strong deficit to a moderate surplus," the economists say.
U.S. corn production will rise 35% from the droughtinduced lows of 2012/13. In its report, Rabobank projects that a record 97.6 million corn acres will be planted in the U.S., further displacing soybeans. The bank’s model suggests that the majority of the 0.7 million acre increase in corn will be in the Northern Plains, displacing soybeans and wheat, and the Delta, displacing cotton.
Soybean prices, meanwhile, are expected to be supported in first quarter 2013 on tight export supplies, but prices for the year will come in below 2012 levels. The current global supply shortage of soybeans, a result of drought in North and South America’s last season, has not been fully accounted for in prices. Rabobank believes that prices will rebound until the new South American crop is available in March.
Economists expect South America’s soybean output to recover 30% from year-ago levels to reach record levels and be bearish for prices. Rabobank forecasts Chinese soybean import demand to rise 6% year-over-year for 2012/13 and an additional 7% in 2013/14, noting that China’s structural shift toward increased soybean imports will persist.
Futures prices for wheat are forecast to rise to $9.10 per bushel in first quarter 2013 and then fall 23% to $7 per bushel by the fourth quarter. A strong decline in wheat prices is expected, provided production in the U.S., the European Union and the Black Sea region is within 5% of trend. Wheat production in the Black Sea region alone is forecast to increase 23.9 million tons to 88.1 million in 2013/14.