RICHARD BROCK has warned farmers for over a year to batten down the hatches by becoming more efficient producers and marketers and to be ready to secure a good price when the opportunity is there.

After the latest USDA crop report, along with reams of data from domestic and world markets and the overall economy, Brock has these 2010 projections for central Illinois region cash corn and soybean prices:

“For corn, prices should range from $3 to $4/bu. the first third, $2.75-4 from May through August and $3-4 the final third. Soybean prices should be $8-9/bu. throughout the year, Brock says.

Market forces shaping prices these days include, “the worldwide recession, index funds, ethanol, acreage and yield,” he says.

When asked what he expects demand will be for corn and soybeans domestically and internationally in the three time periods of 2010, Brock says, “Livestock demand will weaken most of the year, ethanol demand will remain strong and grow, corn exports will stay at 17-19% of production and soybean exports will stay strong but not grow much due to competition from South America.”

China reports it will continue purchasing grains and soybeans from its farmers in 2010, raising its minimum purchase prices for some crops in an effort to protect farmers' interests and stabilize grain output.

He says the slow economic recovery shouldn't have a major impact on corn and soybean prices. “Economic recoveries take a long time — years. This is a consumer-driven economy and the consumer is unemployed, with little hope of becoming employed. Direct impact on corn and soybeans, however, will be minimal.”

CHRIS HURT

“The world economic recovery and the weak dollar will also keep oil (energy) prices strong, and strong oil prices will support ethanol prices and the increased use of corn for ethanol,” says Hurt. “Expect to see at least half of the idled ethanol plants return to production in the coming year.”

He notes that market volatility could change grain market directions at any time.

“For January through April, Midwest cash corn prices will likely range from $3.40 to $3.80,” he says. “The May to August period should see a $3.50-3.90 range, with a $3.50-4.10 range for September-December. For soybeans, a $9.40-10.50 range is seen for the first third, $9.50-10.50 the second and $9-10 the third.”

Market forces shaping prices include “the boost for ethanol, and world economic recovery will be the key factor,” he says. “I assume the world economy will recover faster than the U.S.

“Faster world recovery will also contribute to higher interest rates outside the U.S. These factors will keep the dollar weak. More income and a low-value dollar will keep exports of grains and oilseeds strong,” Hurt says.

“For corn, the animal industries will continue to moderately reduce herds and flocks over the next six months. This means a weak consumption base for feeding.

“USDA has forecast exports up 16% (for 2009), but the late corn crop had many buyers on the sidelines waiting for a cheaper harvest prices,” he says. “The world's buyers will be more aggressive at buying 2009 corn, and exports will meet or exceed the USDA mark of 2.15 billion bushels.”

For ethanol, the 4.2 billion bushels of corn use will meet the 12-billion-gallon Renewable Fuel Standard for 2010. The EPA will need to increase the allowable ethanol blend to at least E12 this December, he says.

Economic growth will probably be strong enough in China and the rest of the world to increase the demand for soybeans and oilseeds. The worry will be how big the South American crop could be.”

Hurt says U.S. growers “are probably not” in a long-term economic downturn because more market-oriented economies worldwide are generating a higher demand for grains and oilseeds.

He concludes, “There has never been a permanent recession and there won't be one this time. And there is no history that says crop production will be at new records every year. A return to normal production means stronger prices.”

CHAD HART

The Iowa State economist isn't sold on a strong worldwide economic recovery and sees continued pressure on corn and soybean markets. His 2010 price projections don't have any cash corn prices over $3.45 nor any soybean prices over $9.25.

“The large corn and soybean crops and slow economy are the main things that will likely hold prices down,” Hart says. “Corn looks like it will range from $3.15 to $3.25 in Iowa from January through April, $3.35-3.45 from May through August and $3.15-3.35 from September through December. Soybean prices for all three time periods should average about $9.25.”

Price volatility will probably still impact prices with up and down spikes, says Hart, meaning growers should watch for pricing opportunities when upswings develop.

But overall, pressure will keep prices at lower levels. He projects: “I'm still estimating the 2010 prices based on large corn and soybean crops, questionable trade prospects (even though early export sales have been encouraging) and general economic concerns. My projections are reflecting less optimism about the economic recovery.

“We may remain at the bottom of the cycle for awhile. Short-term, that implies lower prices, given the large corn and soybean crops. In the longer term, inflation is a concern and could support crop prices as we look into 2011 and 2012,” he says.

Hart sees a continued comeback in the biofuel industry. But lower demand in the cattle, hog and poultry sectors presents added pressure for growers.

Ethanol's demand for corn will keep marching upward at a slowing rate. Biodiesel's demand for soybean oil should rebound a little as the RFS takes hold, he says.

“Feed demand may back off with fewer animals and more distillers' grains on the market. Export demand is showing early signs of strength, but continued strength will depend on the economic recovery,” Hart says.

GAVIN MAGUIRE

Gavin Maguire's Chicago-based eHedger team sees corn and soybeans strapped with a “defensive” attitude heading into 2010, lingering through much of the year.

“Conditions currently suggest a $3.50-4 range for December 2010 corn futures and $8.20-9 for November 2010 soybeans for the opening months of the year, with prices favoring a lower bias early in the year and then edging higher,” Maguire says.

“We're anticipating corn to make some headway versus soybeans in a bid to hold onto acreage. The soybean market may struggle through the opening quarter if growing conditions in South America pan out and set the stage for more aggressive soybean export competition from that region.

“Ethanol manufacturers' improved economics looks set to sustain their strong usage of corn,”he says. “However, the same can't be said of the livestock industry, which is feeling the pinch from poor end-product prices and high input costs.

“In addition, feeders may choose from huge stocks of feed wheat and growing amounts of DDGs,” he says.

South American output is the major factor for soybeans, he adds.

“There are ‘green shoots’ starting to show in several regions, which give us hope that the global economy is through the worst of the recession and on the slow road to recovery. If this occurs, expect increases in consumption of all commodities.”

Maguire sees pressure on demand from excessive feed sources, tightened credit and limited investor interest in financing new biofuel plants. However, with ethanol expansion plans underway elsewhere, there's reason to expect U.S. ethanol demand to remain a key driver of corn consumption, while increased biofuel consumption should propup soy oil prices.

He says soybean exports may deteriorate steadily once the South American harvest gets underway and its increased exports emerge.

“Domestically, with the hog industry still in disarray, our meal demand environment may stay soft and could limit overall domestic soybean demand,” he adds.

THE EXPERTS

RICHARD BROCK
PRESIDENT OF BROCK ASSOCIATES AND CORN & SOYBEAN DIGEST MARKETING EDITOR

CHRIS HURT
PURDUE UNIVERSITY AGRICULTURAL ECONOMIST AND GRAIN MARKETING SPECIALIST

CHAD HART
IOWA STATE UNIVERSITY AGRICULTURAL ECONOMIST AND GRAIN MARKETING SPECIALIST

GAVIN MAGUIRE
DIRECTOR, eHEDGER