PERTH (Reuters) — U.S. farmers may be reluctant to sell corn as they face prices that have dropped 30 percent this year on expectations of a bumper harvest, a U.S. Grains Council official said on Wednesday.
Lower output in the United States, the world’s No.1 corn producer and exporter, had kept prices high in recent years, but U.S. producers are expecting a record crop this year.
“In the glut of the harvest, we will likely trade lower than we are now, but because of farmers’ strong financial position, they will store the corn as opposed to sell early on,” Ron Gray, secretary and treasurer of the industry body, told Reuters on the sidelines of a conference in Australia.
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U.S. corn futures hit a two-week low on Monday and soybeans also fell as market players continued to brace for large crops and forecasts called for milder, non-threatening weather in the Midwest production belt.
U.S. producers have enjoyed huge profits over the last few years as corn prices climbed to record highs due to tight global supplies.
U.S. corn futures surged to an all-time high of $8.43-3/4 a bushel in August last year as the worst drought in more 50 years across the U.S. grain belt curbed production. But December corn stood at $4.74-1/2 a bushel on Wednesday.
“In the absence of an early frost, lower prices are probably here for the remainder of the fall,” Gray said.
U.S. corn and soybean crops have experienced ideal weather for most of the growing season this year, which has boosted production prospects.
The Pro Farmer Midwest Crop Tour on Tuesday projected Nebraska’s average corn yield at 154.9 bushels per acre, up from a drought-reduced 131.8 bushels per acre last year for the country’s No. 3 corn producing state.
The tour projected Indiana’s average corn yield at 167.36 bushels per acre, up from a drought-reduced 113.25 last year for the state.
Gray said declining prices could curb growth in lower-cost producers such as Argentina, Brazil, and Ukraine, which have been expanding production in recent years.
“There may be places where acres will shrink in the very marginal areas where (the cost of) transportation is exceedingly high.”
Competition in the corn export market has been heating up with higher production in key global suppliers.
Argentina is likely to export 22 million to 24 million tonnes of its 2012-13 corn crop, its deputy agriculture secretary told Reuters on Tuesday, suggesting the government will authorize more exports after boosting its crop forecast.
Last month Argentina revised upward its outlook for the nearly harvested corn crop by 23 percent to 32.1 million tonnes due to a larger-than-expected planted area.
