Some analysts warned a few months ago as record world crops filled bins that corn prices would drop below $4 per bushel.
However, the low was set Jan. 10 at $4.14 1/2 and has staged a rally of 16 percent since then, sparked by better than expected U.S. exports and slightly better feed and ethanol demand.
Last fall, the U.S. Department of Agriculture forecasted a year end stocks-to-use ratio of 14.6 percent, up from a tight 7.4 percent the previous year.
That forecast is now a less burdensome 10.9 percent in the March USDA report.
Cheaper corn prices are attracting good demand from Mexico, Japan, China, South Korea, Colombia and Peru. For all the worries about China’s rejection of cargoes because of an unapproved genetically modified variety, exports to the Asian giant are OK.
The cold winter and lack of beta agonist feed supplements have supported corn feed demand even with a reduced number of cattle in feedlots.
Also, ethanol demand is stronger than expected and it looks like the U.S. Environmental Protection Agency won’t sharply reduce mandated ethanol use as was expected last fall.
Still, the forecast for the coming year is worrisome, although it is preliminary. The first USDA forecast for 2014-15 shows the stocks-to-use ratio by the end of the year rising to 15.8 percent.
The USDA is expecting the dreaded sub-$4 corn price, pegging the annual average at $3.90. However, that is based on an ambitious yield forecast of 165.3 bushels per acre. The USDA sees a tiny increase in feed demand, a tiny decrease in exports and flat ethanol demand.
The Ukraine situation could affect corn exports, but it won’t affect winter wheat because it’s already in the ground. Corn will suffer if farmers can’t get financing because of the conflict. Last summer, Ukraine grew 30.9 million tonnes of corn and exported 18.5 million tonnes, the world’s third largest exporter.
Any reduction could present an export opportunity for the U.S. and a potential to trim year-end stocks.