Food and feed prices may begin easing this year as Chicago Board of Trade (CBOT) corn prices fall 22 percent to under $5.50 per bushel by year's end assuming huge US corn plantings and normal crop weather, a Reuters poll showed. The Reuters poll of 13 analysts last week pegged the spot CBOT corn price on December 31 at $5.47 per bushel, down nearly 22 percent from end 2012 and about 25 percent below the current level.
The average of analysts' estimates was 35 percent below the record high of $8.43-3/4 hit in early August during the historic drought last summer. Estimates were in a range from $4.50 to $6.50 per bushel. Jerry Gidel, analyst for Rice Dairy LLC said he based his forecast assuming fair to good crop weather. "Bad weather? How high is the moon?," he said referring to the potential for an explosive price rally if drought persists in the US crop belt.
"We're looking for a normal weather year here (US) and with South America production rebounding 30 to 35 percent, we see lower prices at the end of the year," said Don Roose, president of US Commodities, Des Moines, Iowa. "I think there's a good chance the highs are in but with the tight stocks, a weather scare could send prices higher so there could be a roller coaster ride," Roose said.
Traders are placing bets that current lucrative returns from growing corn may lead farmers to plant the largest acreage in nearly 75 years. Widely followed analytical firm Informa Economics has pegged this year's corn area at 99.3 million acres, the most since 1936.
"With a return towards more normal yields, corn carryout could easily double, taking futures below $5 at harvest but rebound near the end of the year, recognising the need to buy acres for 2014," said Bryce Knorr, senior editor for Farm Futures Magazine. The bearish implications from large sowings and assumptions of a normal weather growing season are countering bullish input from the government's outlook for the lowest US corn stockpile in 17 years by the end of the summer.
Rich Nelson, director of research for Allendale Inc forecast a yearly low of corn at $4.42 then a rebound to $5.50 by the end of December. The worst drought in over 50 years last summer has lingered in the US Plains and western Midwest through the winter, leading some to place bets for higher prices, should the drought extend into the summer growing season.
"Weather will again be the principle market factor. I know there will be big plantings but if the drought continues, prices will rise," said Chris Manns, president of Traders Group Inc explaining his contrarian view of year-end corn price at $6.50, the high end of the range of estimates.
Goldman Sachs in mid-January also forecast corn prices at the end of the year at $6.50 per bushel, down 21 percent from a mid-year peak of $8.25. "Global stocks of corn and soybeans are very tight and have been for a while. So If production is able to recover, stocks will see some easing and the market will give a big sigh of relief with lower prices for a time," said Arlan Suderman, senior market analyst for Water Street Solutions. "However, if adverse weather again kicks in, prices will likely test record highs during the growing season and remain somewhat elevated until more is known about production south of the equator," Suderman said.