What is in this article?:
- Corn price, demand forecast strong for 2011
- Could be a bidding war
- It can be said with some certainty, at least for the foreseeable future, that price and demand for corn will be good.
- If expectations are met, more than 13.4 billion bushelswill be either consumed or exported by the U.S. for the 2010/11 marketing year.
- In order toproduce a 13.4-billion bushel crop, U.S. acreage will need to increase at least by two million acresassuming a 160-bushel yield.
With competition for acreage among the various crops expected to reach a fever pitch this spring, it’s anyone’s guess as to the direction of corn acreage for 2011.
However, it can be said with some certainty, at least for the foreseeable future, that price and demand for corn will be good.
The forecast for 2011 shows an increase in the demand for corn, according to University of Georgia Extension economists Nathan Smith and Amanda Smith. Some recovery was expected infeed and exports last year, but the rebound appears to be poised more for 2011, say the economists in their annual corn outlook.
Industrial use of corn driven by ethanol grew significantly (by 23 percent) in 2010 to 4.6 billion bushels. The expected increase in 2011 is slowed to 5 percent, reaching 4.8 billion bushels.
“Corn acres in 2011 will need toincrease to meet demand. Record corn consumption is forecast in 2011 due to a rise in feed use as well as food and industrial use. If expectations are met, more than 13.4 billion bushelswill be either consumed or exported by the U.S. for the 2010/11 marketing year,” states the outlook.
In order toproduce a 13.4-billion bushel crop, U.S. acreage will need to increase at least by two million acresassuming a 160-bushel yield.
The short situation in the corn market should support prices which likely will remain at about $5 per bushel or better until the crop is planted, say the economists. Once the crop is planted and acres are increased, the market will be driven by weather and yield estimates.
Carryover stocks are projected to fall by more than 50 percent to 827 million bushels by the end of summer. This would drop the stocks-to-use ratio to 6.2 percent, historically low for corn. A crop much lower than 13.4 billion bushels will create conditions for price rationing to lower demand possibly switch feeding to substitute grains and sources of protein.
“The raising of the maximum ethanol blend to 15 percent for late-model vehicles likely will not have a big affect on ethanol use as it appears to complicate implementation by retailers. Separate pumps for 15-percent blend likely would add costs to retailers, thereby discouraging adaption,” according to the report.
Outside market factors such as fund and speculator trading, oil prices and the exchange rate will continue to cause volatility in the corn market, say the economists. The value of the dollar gained strength in the last half of 2010 as Europe dealt with economic problems. The United States, however, is concerned about deflation, which would hurt the value of the dollar but make exports more competitive. The U.S. economy needs to grow at a faster pace, around 2.5 percent, to maintain employment.