Crop prices during 2011 were influenced by a wide range of factors that resulted in extremely large trading ranges, says University of Illinois Agricultural Economist Darrel Good.
December 2011 corn futures started the year near $5.50, with the higher trend that began near $4 in July 2010 still in place. The trend continued, although erratically, reaching a peak near $7.80 in late August. Prices have declined sharply since then, with the December 2011 contract currently only about 30¢ higher than at the start of the year, he says.
January 2012 soybean futures started the year just below $13, with the higher trend that began near $9.50 in July 2010 still in place. The price of that contract traded between $12.50 and $14 through mid-August, peaked at $14.74 in late August and then plummeted to $11 in late November. That contract is currently trading near $11.40, Good notes.
December 2011 wheat futures at Chicago were also trending higher at the start of the year. The higher trend started near $6 in July 2010, with the price near $8.50 in early January 2011. The price of that contract peaked near $9.70 in mid-February and is now just over $6, about where the price rally began in July 2010, he says.
“For corn, it appears that 2012 will begin with a continuation of weak export demand. Although China has purchased 95 million bushels of U.S. corn and Mexico has bought more U.S. corn than a year ago, total sales are lagging the relatively slow pace needed to reach the USDA projection of 1.6 billion bushels for the marketing year,” he says.
For the four weeks ended Nov. 24, sales averaged 10.4 million bushels/week, compared to the average of 18 million needed, he says.
“Abundant supplies of wheat and feed grains in the rest of the world are providing stiff competition for U.S. corn. The current year is ending with very strong demand for corn for ethanol production, but demand after the first of the year is much more uncertain due to the expiration of the blender’s tax credit. Longer term, the rate of growth in corn-based ethanol production will likely be limited due to peaking renewable biofuels mandates and limited production capacity,” he says.
Domestic feed demand for corn remains uncertain until the USDA’s quarterly stocks estimates are released, but consumption could exceed the very low forecast, Good says.
“For soybeans, the current pace of consumption is below that needed to reach the USDA projection for the marketing year. The domestic crush during the first two months of the marketing year was about 9% less than in the same period last year, while the USDA projects a 1% decline for the year,” he says.