March 24, 2004 | By: Laura Skillman

Grain farmers across the country are enjoying some of the highest commodity prices they have seen in several years. Those increased prices are due to a range of factors.

For corn, improving demand and stagnant production have resulted in price jumps this winter. Wheat and soybeans are experiencing improved pricing primarily as the result of supply problems,but also have seen some improvement in foreign demand, said Steve Riggins, a grain marketing specialist with the University of Kentucky Cooperative Extension Service . 

"On corn, I think you can make a case for impressive annual growth in demand,” he said. “That occurred with stagnant production and continued to occur with higher prices. The reason is the United States and China . They are accounting for virtually all that increase and the increase in the United States is ethanol and it is not going to go away. Livestock feed continues to be the bedrock for corn demand but institutional demand such as ethanol is an important, very powerful addition. So this looks rock solid.”

Riggins also is bullish for the 2004-05 corn crop although he does caution farmers not to wait too long to price crops and lose out on higher prices. Demand estimates for the coming year look solid and ethanol use will continue to increase. Record use of 10.3 billion bushels is anticipated for 2003-2004 by the U.S. Department of Agriculture and again in 2004-05 at 10.5 billion. This year’s record production was just more than 10.1 billion.

“Anywhere from 10.5 to 10.6 billion bushels total corn use in the coming year is a good number that could easily be consumed if we produce enough corn to keep prices from getting out of hand,” Riggins said.

However, Riggins also noted that a year like 1994, when yield averaged about 14 bushels above trend is possible. If that were to happen this year, yield would average close to 154-156 bushel per acre and result in a U.S. corn crop of 11.4-11.5 billion bushels.

March 30 will be the next big day that could impact the market, Riggins said. That’s when the USDA announces planting intentions and the second quarter stock report. The report needs to confirm that the demand for feed and industrial uses is really as robust as indicated in the first quarter report, he said.

There are about 15 weeks left between now and the height of summer and Riggins said he’d sell a portion of the 2003-04 crop a producer has left each week. If the market drops to $2.80 or less, he’d advise selling it all. But the market should not “crash and burn,” he said.

“Decide how many times you want to sell and that’s how many I would do and you will get a real good average but don’t sit here and let is drop below $2.80 cash,” he said. ”Why let that get out the door? The only reason I see old crop corn going up is if we have a problem with winter wheat as it comes out of dormancy such as major winterkill or a drought in the plains.”

For the upcoming crop, Riggins said he’d have 20 to 30 percent priced at $2.70 or above. He anticipates prices ranging from $2.70 to $3.25, until at least July 4. If the weather is good, prices will begin dropping but won’t collapse. If there is bad weather, corn prices could see $4 to $5.

Riggins said the probability of $3.25 corn is greater than 10 percent and he doesn’t expect it to drop below the $2.70 level until July and probably October when actual combine data becomes available.

“What is important is that you develop a marketing plan,” Riggins said. “You know that every year something is going to happen that nobody anticipates. Every year it’s something different. So your first plan is not going to be your last plan. Conditions are always going to be different so you have to set a reasonable target, start a plan and yet be willing to modify it.”

Soybean prices are the result of the size of the Brazilian crop not yet being known and that the United States has never yet demonstrated that it can or will import soybeans with ease, he said.

If the United States had a normal crop in 2003, production would have way outstripped consumption, he said. Demand is improving, but these high prices are really based on a supply problem.

Imports of beans and bean meal into the United States aren’t likely to occur in significant numbers for two reasons, he said. No company wants to be forever known as bringing soybean rust to the United States . Also, U.S. port facilities are not set up well to bring beans into the country. While soybeans and meal likely will not be imported in any significant amount, oil will be imported, Riggins said.

“You can’t really justify these bean prices without the lack of movement into the United States ,” he said. “We are the biggest consumer of soybeans in the world. So we will bring that crop in here sometime in the future.”

In terms of marketing, Riggins said his reservation price is $6.80 to $6.97 per bushel on new crop. Prices could reach $10 to $12 on old crop and $8.50 to $8.75 for new crop beans if the Brazilian crop is severely damaged. But if that doesn’t happen, Riggins said he believes the price will struggle to hit the $8 plus level.

“If you don’t do anything else draw a line in concrete – sand is too easy to move - and don’t let these prices get away from you,” Riggins advised farmers attending a recent marketing session in Daviess County .



Writer: Laura Skillman 270-365-7541 ext. 278
Source: Steve Riggins 859-257-7256