Chad Hart takes a look at the markets
By Jean Caspers-Simmet
simmet@agrinews.com
Date Modified: 04/01/2010 9:15 AM
E-mail article | Print version
AMES, Iowa — Corn prices have held up even with record crops for three years starting in 2007.
USDA is projecting another record in 2010, but strong demand should hold prices at $3.60 per bushel, the same as for this marketing year, said Chad Hart, Iowa State University grain marketing economist.
USDA is projecting a near-record soybean crop for 2010, but with building supplies, prices will soften somewhat. USDA estimates a 2010 season average price of $8.40, down from $9.45 for 2009, Hart told farmers at last week's Northeast Iowa Agricultural Experimental Association annual meeting in the Borlaug Learning Center at Nashua.
Demand for corn and soybeans has been helped by exports and ethanol production, and improving livestock conditions should keep demand up, Hart said.
With recovery in energy prices, ethanol margins have moved above breakeven, Hart said. Support for biofuels has been boosted by the substantial rise in crude oil prices over the past year. The turnaround has allowed U.S. ethanol production to continue growing.
"Projections for the 2009 crop show 4.3 billion bushels of corn heading to ethanol plants," Hart said. "Looking beyond to the 2010 and 2011 crop years, ethanol demand will continue to build with the Renewable Fuels Standard."
Hart said corn-based ethanol will account for much of the conventional biofuel portion of the standard, increasing corn demand for ethanol to 4.5 billion bushels in 2010.
Corn feed and residual demand is another projected increase over last year, Hart said. Feed demand, however, has declined with the financial woes facing the livestock industry.
"Poultry, dairy, pork and beef producers have been reducing numbers," he said.
But futures prices for livestock and feed products at the close of 2009 suggest r a rebound. Hart projects poultry will recover in 2010, pork in 2011 and beef in 2012.
One sign of coming improvements is the projection for increased meat export demand with the drop in value of the U.S. dollar, Hart said. For corn, livestock feed remains the largest demand category.
Corn export demand is expected to rebound as well, also supported by the continued weakness in the U.S. dollar.
For soybeans, exports are "the big story," Hart said. The strength of export demand has led USDA to increase its soybean export estimate several times. China has already purchased more soybeans from the United States than Iowans produced in 2009.
But, Brazil and Argentina have shifted more area to soybean production, which will mean competition for U.S. growers, Hart said. A potential for a record-setting South American soybean crop has contributed to futures prices favoring corn for 2010.
"But crop input costs have come down a dollar per bushel from last year's highs, improving the economic outlook for both crops," Hart said.
Estimates from ISU Extension show per-bushel costs of $3.50 for corn and $8.67 for soybeans. Hart said corn holds a return advantage going into 2010.
"So corn will likely gain acreage, and soybeans will fall slightly," Hart said. "I expect corn plantings to be around 90 million acres, and soybean area 77 million acres. Other crops will lose area."
Continued economic recovery is a key for crop prices in the coming year, Hart said. Weakness in the dollar will help exports, but the dollar may fight back.