Q: The 2019 acreage debate is about to begin, and it is expected corn acres will increase by 3 million acres. Given the record demand for U.S. corn, do you believe that will be adequate? What is your outlook for new-crop corn values this winter?
Corn Prices Should See Support this Spring
Matt Bennett, Owner, Bennett Consulting
I think a 3-million-acre switch could be asking quite a bit considering the weather last fall for a good chunk of the Corn Belt. But I believe a 3-million-acre increase would keep stocks from falling further—only if we have a national yield of 180 bu. per acre. I don’t see a situation where we have burdensome stocks with that acreage increase, considering the type of demand we are expecting. That being said, if the acreage switch is disappointing to the industry, a rally would likely ensue, which could affect demand in the second half of the marketing year.
For the price outlook, acreage or weather issues could precipitate a strong move for the corn market because demand is so strong. Considering this is a futures market, I’d assume some of the strength we’ve already seen in corn is due to thoughts that the acreage switch could disappoint. How much more upside might we expect in the doldrums of winter?
We all know much is up in the air with regard to U.S./Chinese relations, but assuming the soybean market doesn’t fall out of bed, I could see corn prices well-supported into spring. My initial price target for December 2019 was $4.06, with a second target of $4.18. I wouldn’t be surprised if we see that kind of price action by the time planters roll.
Increase in Corn Acres Needed in 2019
Brian Grete, Editor, Pro Farmer
Our current outlook actually calls for corn acres to hit 93 million in 2019, up nearly 4 million acres from last year. But there’s more uncertainty with the acreage outlook than any recent year. Poor weather and a delayed harvest meant a lot of fall field work wasn’t completed, which leaves more acres uncommitted. Weather and the soybean/corn price ratio will come into play. The $1.65 Market Facilitation Program payment for soybeans versus the 1¢ corn payment could also influence seedings, even though they were for 2018 crop production.
Even with a nearly 4-million-acre increase in corn, we project corn ending stocks will hold about steady in 2019/20, assuming a trendline yield of 177 bu. per acre. Record U.S. animal numbers are expected to fuel more demand, even if ethanol and export demand slows. Bottom line: The corn market will easily absorb a 4-million-acre acreage increase.
The corn market has been stuck in neutral, despite supportive U.S. and global fundamentals. We don’t expect a major upside price move unless corn acres don’t significantly increase or a summer weather problem points to a sub-trendline yield. December corn futures will need either or both to happen to push above the $4.50 level.
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