What Impact Will Corn Prices Have on Supply and Demand
By Moe Agostino, Farms.com
Presently, corn yield forecasts of 150 bushels per acre leave ending stocks ranging 495 million bushels. However, if yields drop in 2012 to 145 bushels – this dramatically reduces the forecasted ending stocks to zero. Any further reduction in corn yields will result in reduced supply available for corn customers. The beauty of a supply and demand market is that shortages create a price spike which naturally rations the demand for crops.
The same dynamics are hitting the Soybean market. This stage in the production cycle means that farmers cannot change the number of acres they have planted and they cannot change the amount that they fertilize. The only thing that they can do now is rest on the whims of Mother Nature.
Right now, the forecast is looking bleak – the best fields and the best genetics are under stress. The current price levels are giving additional support to those who are stoking the food versus fuel debate. The impacts of food price escalation are being felt around the word.
It’s very likely that we may reach $8 per bushel corn. But the other big question is whether we can sustain $8 bushel corn. With a drought like the one we are experiencing now, it will result in a fall of ending stocks inventory of both corn and soybean. This will have an impact on the 2013 crop prices.
The next two weeks will paint us a bigger picture of the 2012 ‘supply and demand’ story and next few months will shed some light on the 2012-2103 ‘demand story.’