Analysts don't see much hope for a price rally in 2014 unless South America's weather and China's continued appetite for soybeans provoke a change in price patterns. As is, analysts expect soybean prices will have a slightly rosier outlook than corn prices.
It's not like they didn't know this was coming. Last year, most experts pointed out the drought staved off a "return to normal" for at least one more year. Farm Futures senior editor Bryce Knorr says U.S. farmers have harvested four crops in a row that were below average.
"For the past two years, we've been one good crop away from a sizeable price decline," he notes.
Knorr says the biggest problem is demand isn't as strong as it has been for the past decade. In fact, he says U.S. farmers could cut corn planting intentions by 4% for 2014 and there would still be plenty to go around.
"People really need to press the reset button on their expectations and manage accordingly," Knorr says.
Corn rally potential
Knorr says the best chance for a corn rally will probably come in March with the planting intentions report. Corn prices could move upward as the market looks to buy soybean acres.
"It's hard to get terribly friendly on prices, especially corn prices," Knorr adds.
From now until the March report, Farm Futures market analyst Paul Burgener expects corn prices will fluctuate in the $4-to-$4.25 range. "Unfortunately for corn growers, I'm not excited," Burgener adds.
However, he does see a bit more potential for a 2014 rally. If South America shifts more acres to soybeans, it could create an early 2014 corn rally in the U.S.
More importantly, Burgener says wheat supplies are beginning to get tight. "For over a year, wheat has followed corn," he says. "This could turn around and corn could follow wheat."
Burgener expects this to play out late in 2013 or in the first quarter of 2014 as it depends heavily on the harvest in Russia, Ukraine and countries in Central Asia.
"If wheat runs up to $8-$9, then all bets are off for corn," Burgener says.
Run the numbers
This winter farmers need to run the numbers on storage costs.
"I don't see a lot of downside to hold it, but there's not a lot of carry potential in the market," says Burgener. He wagers farmers could pick up around 12 cents per bushel from December to March -- right around the cost of storage. Also, keep in mind that harvest prices have typically been higher than spring prices for the past several years, Burgener adds.
University of Illinois ag economist Gary Schnitkey agrees with Burgener that there's not a lot of carry in the market right now. Schnitkey puts his 2014 average price projections at $4.60 for corn and $11 for soybeans. – Flint is editor of sister publication Prairie Farmer
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