Fewer planted acres and rapidly growing consumer corn consumption will place special focus on the importance of the 2006 growing season.
Consumption has the potential to balloon to 11.5 billion bushels in 2006/2007, therefore, at least a 10.4-billion-bushel corn crop is needed to hold an ending-stocks-to-use ratio at 10 percent, says Darrel Good, University of Illinois Extension marketing specialist. With acreage reductions and increased consumer use, a 142-bushels-pe-acre average yield for the United States would be required to maintain the status quo.
"That yield appears modest in context of average yields during the past two years, but it's only about 5 percent below the trend yield for 2006," notes Good. "The current market reflects a substantial increase in the average corn price for the 2006/2007 marketing year. That means a significant reduction in stocks is already built into the market." He believes that corn prices could be quite volatile during the growing season, depending on how weather and other factors evolve.
While there is plenty of corn in storage, consumption is increasing rapidly and that trend is expected into the years ahead.
"Mostof the focus in the corn market has been on the growing ethanol market and its implications on future price and production," notes Good. "That focus has been justified by the rapid growth of ethanol production, especially in the Midwest."
But there is more at issue that for the current marketing year. U.S. livestock and poultry numbers are up, which means there will be more hungry animals to feed. Corn exports are strong, with the exception of Canada, who's trade case has slowed U.S. shipments there.
The point is, more corn will be used, and more corn will be needed. The question is, how will the competition shake out, and at what price. It's sort of like interest rates, there is more upside potential to come (in terms of corn prices) than downside potential.