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Corn prices could slip through 2012 -- FAPRI
Net income for corn and soybean farmers has been good in the last couple of years. Though that looks to continue in 2012, a new outlook this week has crop yields bouncing back and grain stocks normalizing, taking some of the edge off the most bullish factors for farm income over the last 2 years.
"While net farm income may fall a little short of last year, we expect 2012 to be another good year for most producers,” says Pat Westhoff, director of the University of Missouri Food and Agricultural Policy Research institute (FAPRI), which released its latest major ag price projection report Monday. "With normal weather, a bigger crop in 2012 may lead to lower prices this fall. Other crop prices tend to follow corn."
FAPRI leaders stop short of calling for a 94-million-acre corn crop this year, saying farmers will likely plant 93.5 million acres. If yields are "normal," that size of a crop could send prices to down around $4.80/bushel, Westhoff says.
For soybeans, FAPRI officials see prices remaining over $11/bushel, likely making that crop a strong competitor for acres with corn this spring.
"Soybeans must remain strong to be competitive with corn for acreage,” Westhoff says. "Given current tight corn supplies, markets will be sensitive to news about 2012 supply-and-demand prospects. Prices could fall if favorable weather increases crop production."
Ethanol production -- one of the major drivers for corn demand -- looks to remain close to 2011 levels, Westhoff says. But, the expiration of the 45-cent/gallon ethanol tax credit and generally high corn prices could contribute to slower growth for ethanol production through 2012.
Volaility in sectors like ethanol and beef herd numbers, which comprise another major end-user for the U.S. corn crop, will continue to feed similar conditions in the corn and soybean pits through 2012, Westhoff says. "Many of the factors that caused recent price swings remain in flux," he adds.