Corn growers have been busy getting fields ready or actually putting seed in the ground. Spring is a busy time for everyone, and it's easy to set aside marketing strategies. However, setting some time aside to review the markets and your needs, would be time well spent.
To get you started, here's a rundown of some of the more significant factors.
The National Agriculture Statistics Service (http://www.usda.gov/nass/PUBS/TODAYRPT/prog1806.txt) reports corn planting progress at 52 percent, compared with 49 percent a year ago, and 42 percent compared to the 5-year average. The market had anticipated that kind of planting progress, which means there was little reaction to the report. However, December corn has moved off of the $2.75-benchmark several times, so that may prompt a look at marketing plans for that period.
Chris Hurt, Purdue University Extension marketing specialist says, the market has a strong seasonal tendency to reach new highs for new-crop corn futures in late April and May as the market worries about summer weather. The spring corn premium has averaged about 20 to 25 cents per bushel. "I would guess it to be greater this year, maybe more like 30 to 40 cents per bushel."
He points to the historical lesson that corn growers would have been better off to price new crop in the spring rather than wait until harvest. "Of course, this statement reflects the historical average but gives less guidance for this particular year,” he adds.
So, how long do you wait to take advantage of such a premium in the market? University of Illinois Marketing Specialist Darrel Good points to USDA's next report on May 12. It will update the supply and demand balance sheet. Among the potential changes he see include:
1) The rapid export pace since early January may show larger shipments than the current 1.95 billion bushels. Exports are running about 9 percent ahead of 2005's pace and unshipped sales as of mid-April were 23 percent larger for the same time last year. The export pace is on track to reach about 2 billion bushels. A 25-million bushel increase in export estimates is not unlikely in the May report.
2) The rapid gains in the number of cattle placed in feedlots could put domestic feed and residual use beyond the expected 6 billion bushels. Also, the expanding ethanol production could push domestic processing corn use above the 2.985 billion bushels projected.
3) Regardless of whether the next report reflects those changes, the market appears to be poised for eventual increased use. Corn stocks at the current marketing year's close may be 100 to 125 million bushels less than the forecasted 2.3 billion bushels.
4) USDA's 2006/2007 marketing year corn consumption estimates will be of equal interest. A large increase in ethanol use is expected, as well as a significant increase in exports and a small increase in feed and residual use. It could be near 11.5 billion bushels, which would suggest year-ending stocks at 1.35 billion bushels, and an average farm price around $2.25 to $2.30 per bushel.
Bob Wisner, Iowa State University marketing specialist, agreed with Good’s analysis about corn demand. But he also notes that supply may rise to meet increased demand, based on planting progress. “Favorable planting conditions and forecasts of moderate rain in dry areas of the western Corn Belt led traders to anticipate larger corn plantings than the March intentions report, and a possible repeat of the last two year's favorable yields. Early plantings are an important positive influence on potential yields.”
Good points out that there are currently some good pricing opportunities for corn growers. “Current futures prices are forecasting much higher farm prices for the 2006/2007 marketing year than USDA will likely forecast next week. With December 2006 corn futures trading near $2.73, and higher prices for later delivery, the futures market reflects a 2006/2007 average farm price near $2.65.”
Farmgate, University of Illinois