Chicago Board of Trade Market News
Outlook: A standard bushel of corn weighs 56 pounds. If that bushel of corn is priced at $3.50, then it is being sold for 6 cents per pound. Six cents per pound for a crop that has been planted, tended through the growing season, harvested and cleanly removed from the cob so that only the most desirable part of the plant is presented to the final customer. That is an excellent deal for the end users.
U.S. farmers really need prices above 8 cents per pound ($4.50 per bushel) to break even financially, and this fact holds true for farmers around the globe. As noted last week, U.S. farmers may have the financial means to deal with this season’s lower prices but South American and Black Sea farmers may struggle to plant corn next year. As a result, there could be some wide swings in feed grain prices during the next two years.
Various domestic and international buyers seem to recognize that current price levels for corn are likely to be a temporary phenomenon. U.S. corn exports are right on pace to meet USDA’s estimate of 1.9 billion bushels for the current 2013/14 old-crop season, which will end on August 31, and the sales are strong for the 2014/15 new-crop season that will begin on September 1.
USDA is presently estimating that U.S. corn exports will decline in the 2014/15 new crop season to 1.7 billion bushels because of increasing competition from other global producers. However, the territorial issues that Ukraine is experiencing along with the financial issues in Argentina are likely to make the United States a much more attractive source for global buyers.
U.S. corn exports above 2 billion bushels were historically a norm and it would not take much additional buying to return exports to those levels. Signs of increased export demand will likely prompt more aggressive purchasing by domestic buyers for their feed use and ethanol production. Their knowledge that the least costly endeavor is likely purchasing and storing inexpensive corn could ignite somewhat of a race for ownership. After all, if too much grain is purchased then it can be resold, but it probably is not going to be resold at a loss. The transition through harvest of a bumper crop into that increasingly competitive buying process could take four or five months – and then the market will once again be looking at global planting intentions.