URBANA, Ill. — The lower corn prices farmers see will play a significant role in mixed expectations regarding demand factors and the potential for large supplies coming out of South America, said Todd Hubbs, a University of Illinois agricultural economist.

 

In the near term, corn prices look to remain rangebound as old-crop inventories move into the market, Hubbs said. Looking forward to the new-crop season, the potential for strengthening corn prices is present, due to the possibility of a decline in stocks associated with lower corn acreage in 2017.

 

“Ethanol and export markets currently support demand for corn,” he said. “Ethanol production recently ended a long run of producing more than a million barrels per day. The current USDA projection of 5.45 billion bushels of corn used for ethanol production appears attainable with corn used for ethanol sitting at approximately 3.46 billion bushels as of April 14.

 

“Ethanol exports continue at a robust pace and look to provide more support for corn use in ethanol.” Currently, corn exports continue to show a steady pace, with crop inspected for export coming in at 1.41 billion bushels as of April 13, and is now at 63.5 percent of the USDA projection of 2.25 billion bushels for the 2016/17 marketing year. Hubbs said the large corn crop in South America provides caution on export numbers.

 

“Currently, the USDA projects corn production in Brazil and Argentina at 3.68 and 1.52 billion bushels, respectively,” he said. “Approximately 28.5 million acres of Brazilian corn production is in the second crop, which constitutes 68 percent of planted corn in Brazil.

 

“Domestic corn exports should maintain a steady pace into the summer months but could lead to lower projected corn exports during the 2017/18 marketing year. In contrast, domestic feed demand for corn, while still strong, is not performing to initial USDA projections for the marketing year.”

 

He said large supplies of distillers grains and other feed grains reduced the corn used for feed. “As the 2016/17 marketing year continues, the uncertainty surrounding the final amount of feed and residual use for corn will continue,” he said.

“The recent appearance of vomitoxin in 2016 corn across many states will not help corn and distillers grains feeding in the near term, and adds another level of uncertainty.” The USDA projects feed and residual use during the last half of the marketing year at 1.7 billion bushels, which would account for 31 percent of the marketing-year total. Last year, feed and residual use totaled 1.506 billion bushels, accounting for 29 percent.

Hubbs said the prospect for corn prices in the next marketing year is supply-driven at this point. The USDA projects the carryover of old-crop corn at 2.32 billion bushels. But the short-term focus will be on yield prospects for the 2017 corn crop. For now, he said, the discussion focuses on the rate of planting progress and yield potential.

“However, summer weather will determine the magnitude of yield. Unless an unusually large or small percentage of the crop is planted late this year, yield expectations should continue to focus on trend value in the range of 168 to 171 bushels per acre.”

Dave Miller, Iowa Farm Bureau Federation director of research and commodity services, said old-crop stocks are plentiful and near-term prices should continue to reflect ample domestic corn supplies, as well as increasing competition in international markets from South American corn supplies.

 

“New-crop pricing prospects do have some rays of hope coming from lower-planted acreage in the U.S., flooding across a fairly wide strip from Arkansas up through Illinois, Indiana and into northwestern Ohio,” he said. “Add to that some slow-planting progress in various spots scattered across the Corn Belt, and the stage is being set for some strength in corn markets later this year.”