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Grain Price Forecast Goes Higher

(West Lafayette, IN) - Continued decline in production and higher prices for grain are in the most current forecast by USDA.


According to UDSA’s monthly crop projection report on January 12, the corn yield estimate at 172 bushels per acre for the 2020 crop was down 3.8 percent from USDA’s prediction in December.  A slightly more than 14 billion bushel crop nationwide is still sizable but down 2.2 percent from USDA’s estimate the previous month.


USDA also came down slightly from its December estimate on the amount of corn used for ethanol to 4.95 billion bushels.  Mintert said the reason is plant margins for every gallon of ethanol produced have dropped from 56 cents in late October and early November to just two cents per gallon recently.  Shrinking margins came as production dropped from four to five-percent less than a year ago during much of fall to 10 to 12-percent less than 12 months ago in December.


USDA also raised its estimate on the market year average price of corn from $4.00 per bushel last month to $4.20.  The USDA estimate for ending stocks on corn also came down by 150 million bushels from December to 1.55 billion bushels. 


Jim Mintert, a farm economist at Purdue University, ending stocks in June forecast at 3.3 billion bushels have declined ever since largely because of higher than anticipated exports from China.  He said higher demand and lower than expected production is setting the stage for prices to possibly reach levels not achieved since the average price of corn sold for $4.46 per bushel in 2013 when supplies also tightened.


Mintert said ending stocks this year as a percentage of total usage was estimated by USDA at 10.6 percent compared to nine-percent in 2013.  “You have to think that’s a potential target with respect to where this marketing year average price could wind up if we continue to see some strength.  If we continue to see strong demand both in the export channels and domestically,” he said.


USDA lowered its estimate for soybean yields by a half bushel per acre from December to 4.14 billion bushels nationwide.  “That doesn’t sound like much but in an environment where we already had a pretty tight supply situation that’s enough to make a difference,” Mintert said.


USDA also went higher with its estimate on soybean exports by 30 million bushels to 2.23 billion bushels.  “That would be the largest soybean exports on record,” Mintert said.  Mintert citing USDA figures said soybean exports are up 78-percent over last year largely due to China rebuilding a hog population decimated by African Swine Flu.


USDA also increased its soybean price estimate by .60 cents per bush from the previous month to $11.15.  Ending stocks are forecast at just over three-percent.  Total ending stocks for soybeans are projected at 140 million bushels, an amount not seen also since 2013 when the average prices for soybeans was more than $13 per bushel.


“I think some people would probably argue we’re getting pretty darn close to pipeline supplies.  It’s hard to pull that carry over down much more than that.   Anything more than that would suggest you simply ration with respect to higher prices,” Mintert said.


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