What is in this article?:
- Corn market enters 2013 production season in bearish mood
- Turned around last three years
- Trend has changed quickly
- Midwestern analysts
- From a price perspective, unless there’s a recurrence of drought, it’s going to be hard to put $6.50 back on a new-crop corn price for a September delivery.
- We could very easily see a ‘4’ in front of this crop.
Turned around last three years
“Now, however, we’ve been on a steady decline for the past three years from record yields. We have to change this if we’re going to feed the world.”
Usage has been rationed, he says. “The job of the market, with $7 corn, was to turn off demand.
“Ethanol demand has exploded in the past five years, but where most of the ethanol companies are located up the river system, we had poor quality corn this year.
“We saw a lot of high aflatoxin in the 2012 crop. Many of those companies have had to import corn into their own states because they can’t use what’s there.”
On a world level, corn production has been fairly flat over the past five to six years, but there’s a slight increase in usage, says Wheeler.
“We’ve seen standard-of-living increases in India and China, and the first thing people want to do when they get money in their pockets is to eat better, and they don’t want to give that up. We’ve got a world carryout of about 13 percent to get us through the year.”
This past year, there wasn’t much change in the Midwest in the amount of corn planted except in some states where it was lower, he says.
“The anomaly was 1.4 million acres in North Dakota — that’s really what saved the U.S. Non-traditional corn areas stepped it up with these high prices.
“Corn should move out of this area to the West Coast for export, but we’ve cut off exports with our high prices. Customers can go to South America and other places to get cheaper corn.
“So that corn flowed back into the Corn Belt, and no one was ready for it. All of the train cars were positioned in the wrong places, and logistically we had a huge issue to overcome in moving this corn crop.”
The Southeast saw an acreage increase and a bumper crop.
“The drought intensified in 2012 as we moved into the summer. Last year at this time, the Southeast and Texas were the hot spots for drought.
“Now, corn planting is getting later by the day because we can’t get into the fields due to too much moisture in a lot of areas. We’re definitely starting off better than last year.”
For a long time, says Wheeler, the price of corn was up near $7. But there has been a steady decline down into the mid-$5.50s, $5.75 and $5.80.