Extension Communications
Extension 4-H Youth Building
Ames, Iowa 50011-3630
(515) 294-9915
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Extension Communications |
5/3/04
Contacts:
Rachel E. Martin, Iowa Beef Center, (515) 294-9124, remartin@iastate.edu
Robert Wisner, Iowa State University, (515) 294-6310, wisner@iastate.edu
Elwynn Taylor, Iowa State University, (515) 294-7839, setaylor@iastate.edu
Several Factors Will Sway Summer Corn Markets
AMES, Iowa -- An Iowa State University (ISU) expert says that the past winter's burgeoning corn prices may continue into the summer, depending on export demand, United States corn acreage and yields, and the global weather situation.
"These three factors that played a significant part in the market over the past months are the same factors to watch as we head into late spring and summer," says Robert Wisner, professor of economics at ISU.
The increasing cash and futures markets for corn have been spurred by a tightening global corn situation. For the last two years, four of the seven major corn production areas throughout the word suffered poor weather conditions, contributing to a one billion bushel decline in foreign (non-U.S.) feed grain production. That factor, coupled with a smaller foreign wheat crop, has lead to the increase in U.S. corn export demand.
Another factor that will play a part in the markets is the U.S. corn acreage and yield situation. An April 26 report stated that 37 percent of the U.S. corn crop had been planted, compared to 19 percent in 2000, which like this year saw early planting. Also in 2000, corn plantings were about 2 percent above March intentions, triggering grain trade thoughts that a similar increase and high yields may occur this year. Both factors could signal a huge U.S. crop.
"If yields reach the 10.5 billion bushel level, that will likely result in a modest corn carry-over stock increase, pushing prices down," notes Wisner. Producers should watch for the final report on U.S. corn acreage, which will be available from USDA at the end of June. Additionally, Wisner warns that corn exports have a long history of spikes, followed by a decline the following year as foreign crops recover. "We've watched this trend often ring true in the markets since 1867," he cautions.
The significant third factor that will affect the global corn market scene is weather. Wisner believes "it is fair to say that global weather will play the biggest part in the markets as we head through the summer months, and bad foreign weather this year could be explosive for U.S. markets."
However, Elwynn Taylor, professor of ag meteorology at ISU, advises producers not to hold their breath. "What we saw last year in foreign weather patterns is not expected for this year," he says. In fact, normal weather is predicted globally for 2004.
Looking further into the future, Taylor warns of a potentially volatile global pattern that will affect both foreign and U.S. agriculture. "As we look at historical weather patterns, we can anticipate two droughts in the next six years, affecting the central and eastern parts of continents." This pattern would affect Russia, China, Brazil, and the U.S. midsection, all key corn producing areas.
For an outlook on foreign weather conditions, Taylor recommends the USDA's Joint Agricultural Weather Facility Web site, found at http://www.usda.gov/agency/oce/waob/jawf/.
Coupled with this year's weather forecast, Wisner looks at the history of corn futures to predict this summer's markets. "Futures have strong tendency to develop risk premium during winter and spring months, and then as the season progresses, those premiums tend to go down," he says.
So what should producers be doing to protect their profits? Wisner offers four key tactics: "Farmers should closely watch the weekly crop condition reports, read the June 30 corn acreage report, monitor the foreign global weather situation, and consider selling significant amounts of new and old crop before we get too far into the summer, unless there are clear indications of emerging weather problems."
For resources and links to current crop conditions, cash and futures markets, and world weather, visit Wisner's Web page at http://www.econ.iastate.edu/faculty/wisner.
For more information, contact Robert Wisner at (515) 294-6310 or wisner@iastate.edu, or Elwynn Taylor at (515) 294-7839 or setaylor@iastate.edu.
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