(West Lafayette, IN) - Increasing corn prices, driven partially by higher exports particularly from China, is forecast by USDA in the coming months. The projection was viewed as a welcome surprise to Jim Mintert and Michael Langemeier, agricultural economists at Purdue University who hosted at a webinar at the West Lafayette campus about the outlook for crop prices.
“This is good news compared to where we were a month ago,” Langemeier said. Corn prices were down to $3.10 per bushel a month ago. USDA is forecasting the per bushel price of corn to hit $3.50 based on fall yield estimates being lower than originally forecast and projected exports for the 2020 crop at 32-percent above predictions a month ago.
Another factor is USDA projecting the amount of U.S. corn used for ethanol production in fuel increasing to 5.1 billion bushels this year from 4.6 billion bushels last year. Mintert, though, said there is reason to doubt if corn production for ethanol will attain USDA projections. He said demand for corn for manufacturing ethanol dropped 50-percent after COVID-19 struck from people due to stay at home orders not driving as much. Ethanol demand has since made a strong recovery as COVID-19 restrictions were loosened, but for the past few months has remained at 15-percent below from a year ago.
Also good news for prices is projected corn production being 2-percent less than what USDA predicted earlier because of adverse weather conditions like drought late in the summer. Lower than expected production could help make a noticeable drop in year ending stocks for corn which some experts predicted early on at 21-percent. “Reduction in production and increased usage is a move in the right direction,” Mintert said.
Mintert said it’s possible for corn to reach $3.60 per bushel if exports, yields, and usage for ethanol rise above current projections. “I don’t think that’s likely but it’s possible,” he said.
Soybean prices also appeared to be on an upward trend with future prices up roughly 18-percent because of similar factors like higher exports from China and yields forecast by USDA being slightly lower than originally projected. USDA estimates show heavy losses in corn and soybean production in Iowa but only modest losses in states like Indiana and Ohio.
Kentucky and Minnesota are among the areas where record corn and soybean production is expected to set records. Mintert said there are indications demand from China is driven mostly by the country attempting to rebuild its pork industry decimated by African swine fever since 2018. He said ending stocks for soybeans could dip to 10-percent, which would be a noticeable drop from the 23-percent and 15-percent carry over the past two-years. “That could tighten more if the yields are not as good as USDA expects,” he said.