Analysts See $10 Corn and
Nearly $20 Soybeans as Possible
If current weather patterns continue, $10-per-bushel (bu.) corn and nearly $20-per-bu. soybean futures prices are possible, analysts predicted Tuesday, July 10, during a panel discussion at the Chicago Mercantile Exchange (CME) ahead of the July 11 USDA World Agricultural Supply and Demand Estimates (WASDE) report.
This year's combination of heat, drought and timing in key corn and soybean states is setting up a scenario that could create crop losses far worse than those in previous drought years such as 1988, according to AgResource Co. President Dan Basse and Founding Principal of The Hightower Report Terry Roggensack.
Looking at other years, "We haven't seen heat and dry gang up like this before," said Roggensack.
With the lowest soil moisture profile since 1895, the second-driest June since the Dust Bowl, and 100-plus-degree heat, Basse said he has never seen crop losses this large occur in such a short amount of time.
"We are seeing fields in Illinois and Indiana we think will yield nothing," he said, noting that as recently as the beginning of June, it looked as though a huge corn crop was on the way.
Corn and soybean futures markets are expected to remain high-priced for months to come, Basse predicted. "We don't know how high is high." He expects to see corn at $8 to $9 per bu. and soybeans at $17 to $19 per bu.
Roggensack went even further. From a futures market charting point of view, he noted that when all-time-high price levels are breached, those prices are often exceeded by 20%. He said that opens the door to $9.50 to $10 corn and soybean prices just under $20.
The analysts predicted an average national corn yield of around 140 bu. to the acre, assuming near-perfect conditions going forward, but current weather maps are not predicting such conditions. Basse pointed to National Oceanic and Atmospheric Administration (NOAA) data that shows much of the country needs 15 to 20 inches of rain. Current 10-day forecasts show little hope of rain over much of the Midwest.
"It is really getting too late to help this corn crop," said Basse. "You might fill out a few kernels better, but it won't cause much of a change in the corn yield."
Possible fallout
Expect to see livestock producers feeding more wheat here and abroad, the analysts predicted.
They also wondered aloud if the renewable fuels standard mandate for corn use for ethanol might need to be reduced to free up corn supplies. They noted, however, this would be a tough political fight to win against the administration's green energy agenda.
Protein companies take a hit
In a research report titled, "Children of the Corn — Scary Times in Proteinville," J.P. Morgan analyst Ken Goldman on July 10 lowered his earnings estimates for Tyson Foods, Smithfield Foods and Sanderson Farms in the wake of rising feed prices.
In the end, it might come down to which companies are best hedged on their feed requirements. On that score, Goldman gives the nod to Smithfield, which announced a month ago the company was more than 50% hedged on corn for fiscal 2013, ending in April.
Editor's note: This article was reprinted with permission from Meatingplace at www.meatingplace.com.
