Thanksgiving will soon be here and it’s time to consider all the wonderful things we should be thankful. This, of course, is easier said than done. It has been nearly 18 months since we last saw $4 corn in southern Minnesota, a breakeven price for only the most efficient producers. It may not be easy, but giving thanks is the right thing to do. Here’s what I am thankful for in the fall of 2015.
Thank goodness for big crops. My home state of Minnesota has just finished harvesting a record corn crop, with yields averaging in the mid-180 bushels per acre. Not bad for a state with corn acreage stretching to the Canadian border. Similar tales of great harvests will be told in Nebraska, the Dakotas and Wisconsin. Iowa yields may not be record breaking but they will be very strong. Low prices hurt, but an extra 20-30 bushels per acre will help close the breakeven gap, but only in the western Corn Belt.
Here’s a trivia question for you. Has any state ever averaged 200 bushels per acre of corn or more? Yes! Illinois did it in 2014. But the 2015 follow-up is hardly a reason to give thanks. Yields in the eastern Corn Belt are 25-35 bushels per acre lower than 2014.
The dollar remains strong and energy prices remain in the tank, which leads me to be thankful for surprisingly strong demand for soybean exports and corn used for ethanol production. Soybean exports are projected to decrease by just 3% in the current crop year. Not bad, considering the strength of the dollar and the fact that last year was a record setting year for soybean exports. Corn demand for ethanol production is an even better story. Despite sharply lower crude oil prices since the first half of 2014, the U.S. ethanol industry is projected to process a record number of bushels in the current crop year.
Big crops put prices on the defensive. Imagine where we would be if demand were not so stubbornly strong?
I’m thankful for a stable and constructive outlook for corn. What exactly does “stable and constructive” mean? It does not mean a bullish outlook for corn – the stocks situation is too comfortable to build a bullish case. But it is not exactly a bearish outlook either. Look closely (see chart) and note that corn stocks are projected to decline in the current crop year. The decrease will be small – very small – but step one towards better prices is declining stocks. Corn stocks are also declining worldwide. Dramatically? No. But, again, lower stocks are a step in the right direction for prices.
Corn is king. We produce three major crops in the U.S. – corn, soybeans and wheat – but corn is king. The soybean situation is troubling. Worldwide, more planted acres and great yields have outrun an otherwise great story in oilseed demand. The situation in wheat is no better. Stocks are rising both here and abroad.
If we are too find our way out of the current low-price funk, we need the corn market to lead the way. Compared to soybeans and wheat, the corn situation is stable and constructive. For that we should be thankful.