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2013 corn price potential

12/19/2012 @ 9:26am

Wondering about your 2013 corn and whether to price or not? You're not alone. Right now you can likely forward contract and receive close to a $6.00 cash price for fall delivery, and for many of you, that's close to $1.00 profit on your acres.

Yet, it's hard to price now: Moisture in your subsoil is likely depleted, which makes the notion of committing bushels hard to digest. What if your part of the country does not receive precipitation? Will you even have a crop? Forward contracting early may have burned you last year because of the drought. Prices went sky-rocketing higher, and your final yields were probably the worst you've had ever.

Marketing your crop this year will likely be even harder than last year. The best way to be ready for the marketing challenges that lay ahead in 2013 will be to first imagine all of the possible scenarios that could unfold… Scenarios that could push prices higher to test recent highs, or scenarios which could push prices lower, even lower that you're wanting to admit is possible.

Recently, someone asked me if it would be possible for the U.S. to plant 100 million acres of corn for 2013. My reaction was that I was skeptical. Then I started to call around to different seed reps from different companies across the Midwest, and sure enough, seed sales for corn are up anywhere from 5% to 15% depending on location. An unexpected scenario at first blush.

So what does that mean for prices? Let's look at a few scenarios. In the following scenarios, I will assume a yield of 147, which will be better than last year's 122.3 (assuming that we might get some precipitation this winter and spring, but not enough to fully relieve the drought). Be ready, though-- in February, the USDA will likely use a "trend line" yield number of 162, and will wait to adjust that number until Mother Nature proves otherwise.

POSSIBLE 2013 SCENARIOS:

  • If U.S. farmers plant 96.9 million acres of corn, like 2012, and if demand remains constant, and yield comes in at 147, then ending stocks will be 2.53 billion bushels, MUCH higher than the current estimate of 647 million bushels.
  • If U.S. farmers plant 98 million acres of corn, and if demand remains constant, and yield comes in at 147, then ending stocks will be 2.677 billion bushels.
  • If U.S. farmers plant 100 million acres of corn, and if demand remains constant, and yield comes in at 147, then ending stocks will be 2.957 billion bushels.

Remember, the market trades on perception of the future. If perception is that ending stocks will grow, then prices will drop. If the market feels that the drought will continue, well, that paints a totally different picture and we will probably see prices hold current values, or retest summer highs, as follows:

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