Corn futures prices tumbled by nearly 10¢ per bushel this past week, with old-crop May closing Friday at $3.77, September at near $3.92 and December new-crop at $4.02. That’s even with good exports and USDA’s projected ending corn stocks still below trade expectations, notes a Memphis, Tenn., market analyst.
“Nearby CME Group corn futures gave up 9½¢ this week, despite USDA-projected stocks that were lower than trade expectations and relatively strong export sales,” says Louis Rose of Risk Analytics, LLC. “In the end, ethanol margins that remain challenged, U.S. currency that flirted with par and bearish soybean and wheat sentiment kept (corn) futures under pressure.”
“The September contract gave up 9¼¢, even as rains continue to hinder sowing of the crop across the southern tier of the U.S. Many acres intended for corn in the Midsouth either have been, or will be sown to grain sorghum per strong basis levels.”
Rose notes, however, that there is potential for corn rallies that should interest growers. “The corn market harbors upward potential on any selloffs in U.S. currency and by the almost inevitable pending weather market season,” he says.
Bryce Knorr, senior editor for Farm Futures, adds that wet early conditions could generate selling opportunities over the next two to four weeks.
Meanwhile, a recap of last week’s USDA Prospective Plantings report shows that farmers intend to plant 89.2 million acres of corn, 1.4 million less than in 2014, but about 470,000 more than the average trade guess. Those still-high acres and lower prices – narrowed by USDA this week by 5¢ on each end to $3.55-3.85 per bushel – don’t project much profit potential.
Gary Schnitkey, University of Illinois ag economist, says farmers will face lower 2015 incomes, particularly if corn and soybean prices remain at current levels. “If corn prices continue to be below $4.40 into the fall, there will be mounting pressures for farmers to reduce 2016 cash flows through reduced cash rents and reduced fertilizer, seed, and pesticide expenditures,” he says.
“Input manufacturers, however, may not see the need to reduce input prices, as corn acres did not decrease significantly in 2015 while input prices were high. Therefore, not having a significant corn acreage reduction in 2015 may mean less downward pressure on input prices for 2016 production.”
In a bright spot, ethanol sales have been stronger, a sign of higher gasoline consumption, says Mark Welch, Texas AgriLife Extension grain marketing specialist.
“Ethanol consumption in March was 10% above year ago levels and 6% above the average of the last four years,” he says, “For the corn marketing year, ethanol use from September through March is 7.764 billion gallons, up 2.5% from the 7.575 billion gallons at this time in 2013-2014 and 2.2% above the four-year average for this time of year of 7.596 billion gallons.”