Market Offers Guarded Optimism

[highlight]2016 Outlook[/highlight]

Clemson Cooperative Extension economist Nathan Smith is optimistic corn can rebound some in 2016, but global supply-and-demand pressures will continue to depress cotton, peanut and soybean prices.

Strong demand for ethanol and livestock feed are likely to support corn futures, Smith says, though prices could dip if production spikes next year, he said. Corn prices have ranged between $3.35 and $3.95 per bushel.  But, he adds, “Costs are going to have to adjust pretty soon for margins to improve.”

“I’m probably more bullish on corn than any crop right now, but it’s going to depend on what farmers plant throughout the U.S.,” says Smith, who moved from the University of Georgia to Clemson last fall. “I’d say look for pricing opportunities when futures get above $4 in the near term.”

For South Carolina producers, increasing the corn yield just one percent would pocket farmers nearly $1.3 million, based on recent production data. Producers in that state planted 278,000 acres of corn in 2014 at a production value of $127.8 million, according to U.S. Department of Agriculture data.

pointersNot A Significant Increase

Mark Welch, Texas Agri-Life Extension economist, says the following in his market report.

“The most recent numbers from the Agricultural Marketing Resource Center at Iowa State University on ethanol profitability show plants operating at just below cost of production in October. Total costs have been about $1.84 per gallon the last three months and revenue has averaged $1.82 per gallon. For the previous 12 months, cumulative profitability has been $1.00 per gallon. Besides falling ethanol prices, another factor impacting revenue is a sharp drop in the price of distillers dried grains with solubles (ddgs), down from $181 per ton in April to $111 per ton in October.

“Ethanol production numbers from the Energy Information Administration last Wednesday show production running at 41.8 million gallons per day for the week of Jan. 1. That is 5 percent above a year ago and 9 percent above average. At the current rate of ethanol production, 5.304 billion bushels of corn would be needed compared to USDA’s forecast in the December WASDE of 5.2 billion bushels.

“My marketing plan for 2016 again calls for breaking up sales over four pre-harvest time periods and the final 20 percent at harvest, along seasonal tendencies in the corn market. My early budget projections show a breakeven price of corn of $4.13 and $4.08 for grain sorghum. Prices on the 2016 December corn contract closed back today where they left off on Dec. 31. There appears little on the horizon to suggest a significant increase in corn acres for 2016 so I expect much of the production discussion to focus on yield. A state of flux in a major weather phenomenon during the corn-growing season may provide marketing opportunities in the spring.

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