For the past 27 months, farmers have been paid less than $4 a bushel for their corn crops, “and prices below $4 are expected to persist well into 2017,” says economist Darrel Good of the University of Illinois. There are only two paths that could lead to higher prices, he says at farmdoc Daily: a drop-off in South America or a much smaller U.S. crop in the new year.
Brazil and Argentina are forecast by USDA to expand corn production this marketing year by a combined 25 percent and exports by 40 percent from last season’s totals. The increase is due mostly to a return to normal production in Brazil after suffering bad weather for the 2015/16 crop. Brazil harvests corn each February through May. The planting season is in full swing in Brazil and Argentina at the moment, so USDA’s forecasts are tentative.
“If South American production increases as projected, a large decline in U.S. acreage and/or a 2017 yield below [average] may be required to push the average corn price above $4.00 during the 2017-18 marketing year,” writes Good. Corn is the most widely grown U.S. crop, planted on 94.5 million acres this year. Early projections call for a 3-percent reduction in U.S. corn plantings in 2017. With average yields, that would bring a crop of 14.1 billion bushels, nearly 1-billion bushels smaller than forecast for this year. A crop that size could reduce the year-end corn stockpile to roughly 2 billion bushels, a 17-percent drop but still the second-largest figure in 13 years.