CHICAGO, April 13 (Reuters) – Huge corn stockpiles in the United States will likely continue to weigh on prices in the next few months, even as farmers cut plantings in favor of soybeans, as leftover supplies from a record 2014 harvest buffer any production cuts.
Farmers are expected to pull back on corn acreage because prices have fallen 29 percent from last year’s peak and overseas demand is waning.
The U.S. Agriculture Department expects this year’s soybean acreage to be a record 84.635 million acres, while corn acres are expected to fall to 89.199 million acres. If that happens, the 4.564 million-acre split between the two crops would be the fifth-tightest ever.
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Since the USDA began publishing data on acreage, corn prices tend to fall throughout the planting season when the split between corn and soybean acreage is this tight.
In eight of the 10 years when the split between the two crops was the tightest, the new crop December corn contract dropped in the three months between the government’s prospective plantings report at the end of March and its acreage report at the end of June. The average decline for this time, when farmers are typically busy in the fields, was 10.8 percent.
December corn futures have already fallen 1.2 percent in the two weeks since the government’s prospective plantings report was released. That follows a 4.8 percent decline during the first three months of the year.
Farmers have been holding huge amounts of corn in their storage bins since last year. Those supplies will have to be sold before this year’s harvest. Once that starts, cash market weakness could bleed into futures prices, said Ted Seifried, vice president and chief market strategist at Zaner Ag Hedge.
“The on-farm storage of corn right now is the big negative for the corn market,” Seifried said. “With revenue being down as much as it is year over year, these guys are going to need to bring in cash before we finish out the growing season.”
U.S. corn stocks as of March 1 stood at 7.745 billion bushels, the biggest since 1987. Farmers were holding 57 percent of the total in their grain bins.
