Corn Prices Headed for Record Highs as Crop Shrinks
Food is a relatively small share of the corn crop, with the bulk going to grain feed and ethanol. The USDA projects livestock use of corn will be 4.8 billion bushels in the year beginning September 1, and ethanol production is expected to be 4.9 billion bushels.
Exports are expected at 1.6 billion bushels. The government expects a total crop of 12.97 billion bushels, down from its earlier forecast for an all-time high of 14.8 billion bushels but well above industry forecasts.
“We’re really going to see this ethanol story heat up and that’s probably going to be sooner than later. That’s going to be interesting how this thing plays out. Nobody’s going to make any major moves on the required ethanol use until they know what the crop size is,” said Mittelstaedt. Ethanol producers have been shutting down some production, as driving demand ebbed and margins were pinched.
The hot, dry weather is expected to continue in the Midwest and is now spreading to the western and northwestern partsof the corn belt. The scorching heat has come at the worst possible time for corn. During the worst of the hot weather, much of the corn belt was in the “tasseling” stage , which is when corn pollinates and the size and quality of kernels are determined.
Mild, wet conditions earlier this spring resulted in farmers planting the corn crop much earlier than normal. As a result, 71 percent of the crop has pollinated or is pollination, compared to a five-year average of 36 percent, according to USDA. Only 16 percent of the soybean crop was in the critical “pod-setting” stage.
The current rain forecast is for one inch or more in each of the next two weeks, but it is unlikely to make much of a difference.
“I don’t think it changes much in terms of the crop size moving forward,” said Mittelstaedt. “The damage is done. The majority of the yield loss has already been assured.”
Crops trading on weather are highly volatile and very emotional, he said. “What you can’t say is what about the impact on the market. If it started raining tomorrow, and it rained for two weeks, corn would break $2 ” despite the damage, he said.
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