Last year, crop producers shied away from planting corn, leading to prospects for moderately reduced corn carryover and supplies that otherwise probably would not have occurred. This season will be considerably different than the last five years, when stocks were rising.

Bob Wisner, Iowa State University agricultural economist, says last year produced a 9.6-billion-bushel crop. Meanwhile, the expected corn usage is more than 10 billion bushels. This would cut into the sizable carryover stocks and could increase corn prices from 20 cents to 25 cents over last year’s prices.

In USDA’s December feed-grain update, Aug. 31, 2002 corn carryover stocks were projected at 1.57 billion bushels, which was unchanged from November’s levels, and 325 million bushels above last year.
Corn prices are expected to average about $2 a bushel for 2002, which is a 15-cent increase from 2001, says Chris Hurt, Purdue University agricultural economist. When forecasting the feed grains’ future, Hurt looks for corn to be up 20 cents to 25 cents in the near term, and move lower into the late spring and summer of this year.

Of course, weather is always the deciding factor on yields and prices, so Wisner examines not only expectations of a normal year, but also a drought-affected year and a year with above trend-line yields, using a 2 million acre increase in plantings from last year. His projections also reflect added demand from more than 20 new ethanol plants that are expected to come into operation next year and World Trade Organization impacts on China’s corn trade.

If there is a moderate drought, Wisner expects corn yields to fall to 125 bushels an acre, which is 11 percent below the trend, and U.S. prices to average $3.40 per bushel. If growing conditions are normal, Wisner says corn prices will average about $2.25 with 142 bushel yields, which is slightly above the trend-level.

Wisner expects an additional 2 million acres of corn to be planted this year compared to 2001, in part because of a drop in the cost of nitrogen fertilizer. Soybean acres are expected to be up about 0.8 million acres, he notes.

The big question concerning soybeans and soybean meal deals with South America, which is expected to have another bumper crop this year. South American production has been increasing by an annual average of 11 percent since 1997, with Brazil and Argentina representing 88 percent as much soybean acreage as the United States.

“Since 1997, the soybean crops in Brazil and Argentina have nearly doubled, going from 38 million metric tons to an expected 70.25 million metric tons this year,” says Hurt. “A crop of that size really keeps a limit on price potential worldwide.”

Strong export sales fuel greater demand for soybeans and soybean meal, partly due to Japan’s and the European Union’s ban on all animal-based protein meal in 2001. That’s one reason why total soybean meal exports should be up about 43 percent. This should lead to an average soybean meal price for the marketing year around $154 per ton for 48 percent protein meal at the Decatur market, says Wisner. Hurt believes prices will average about $160 per ton, which is up $13 from last year’s average.

There’s no unanimous consensus about locking in feed-grain prices now, but most analysts agree that the up-side price risk could be great.

“There’s an abundance of soybean meal, but prices are so low that there is risk of an increase,” says Hurt. He cautions that waiting for soybean meal to drop another $5 a ton could leave you holding the bag.

Hurt will admit that between soybean and corn, corn prices are more likely to rise. Since corn is more dominant in swine rations, that’s a potentially bad scenario for you.
Three things could cause a significant increase in feed-grain price, according to Hurt:

1) Weather problems in the United States;

2) A major distortion in the global economy;

3) Weather problems elsewhere in the world, particularly in South America.

Since weather is the biggest influencing factor in this year’s feed-grain outlook, long-term weather patterns are worth noting. Elwynn Taylor, Iowa State University climatologist, says the patterns look similar to those of last year.

“There’s always a chance of drought and always a chance of flooding,” says Taylor. “But the chance of a severe, widespread drought that would lower yields to 90 percent of trend-line yields or lower is only about 17 percent.”

When it comes to determining your feed-grain plans for this year, it really boils down to your risk-management needs. While there is no apparent sharp rally in store for corn or soybean meal prices, both product prices are currently low. The question is, how much upside risk do you want to take?