March was a volatile month for corn  futures prices, but even at the low point in the price fluctuation, farmers still had room to make a profit, says Chad Hart, Iowa State University  agricultural economist.
“During the first part of March, the corn price was $7.30/bu. for May futures,” says Hart. “Then it moved down in price $1.20/bu., and later it popped back up 80-90¢. So, we’ve had quite a rollercoaster in corn prices just for March.”
Initially, corn prices dropped due to concerns over unrest in the Middle East and how sharply rising oil prices would impact the global economy. Another price drop occurred after the earthquake, tsunamis and radioactivity troubles in Japan , which is the largest importer of U.S. corn. Shortly thereafter, rumors began of significant U.S. corn sales to China, and prices shot back up.
“After Japan’s recent disasters, the market expected corn exports to Japan to drop off, but it hasn’t,” says Hart. “This, in combination with the rumored Chinese corn sales, shows that we continue to see building worldwide demand for corn.”
China corn-buying rumors flashed through the market for two consecutive weeks. “The first rumor came out on the 18th, after Thursday’s USDA export report,” says Hart. “The next rumor came out on the 25th, again after the export report. So, rumored China market buys have continued to build.”
As of press time, no official confirmation tying corn export purchases to China had been made, says Hart. Yet, “somebody bought a good chunk of corn [the week of March 21] and just about everyone thinks it was China.”
USDA  projects corn exports to China to total 1 million metric tons (mmt) – close to 40 million bu. – for the September 2010 through August 2011 marketing year, notes Hart. “As of March 25, corn exports to China were officially at 313,000 metric tons (about 12 million bu.),” he says. “However, the recently rumored buy was for 1.25 mmt. So, if this buy was from China, it would be a million for the 2010 corn crop and 250,000 for the 2011 crop.”
Inclement weather around the globe is also making an impact on corn prices, says Hart. “The markets are looking closely at North Dakota and South Dakota weather conditions, because those two states had about 3.5 million acres sitting fallow for the last two years due to cold, wet springs,” he says. “Right now, it’s cold and soggy there again, so the potential for corn production in that region is still in question.”
Also, rains in Brazil and Argentina have been delaying the corn and soybean harvests in South America, points out Hart. “So, all this weather activity has combined for a nice big bounce in the corn market,” he says.
Any misfortune for corn growers in one area means higher prices for everyone else who has suitable acreage to grow corn, he adds. “So, there’s a very interesting acreage battle that’s shaping up for U.S. corn, wheat, soybean and cotton acres this season,” says Hart.
With all the recent price fluctuations, one big question among growers right now is deciding when to market their crop, notes Hart. The answer depends on how much risk a farmer is willing to take, he adds.
“With a December 2011 futures contract at $6.10/bu., the local cash price for Iowa would be $5.50/bu., but the projected production costs are $4/bu.,” says Hart. “So, that would give me a pretty healthy profit opportunity of $1.50/bu. if I sell some corn now, or I could wait and see if corn prices go even higher.”
Currently, it would take at least three days of limit-down price drops to reduce profits from corn production to breakeven levels, he points out. “So, I’d have a day or two to react in the event prices were to drop below my production costs,” says Hart. “Having that two- to three-day reaction period buys you more time to make a marketing decision if you think markets could still move higher.”
Which way the corn markets will move is anyone’s guess, but a lot will depend on weather. “The next big pricing point for corn will be the June acreage report, which will show us what farmers actually got planted,” says Hart. “Depending on how planting goes, I could see corn prices go even higher than they are now.”
Farmers who choose to lock in a healthy profit margin now, would still do very well, even if prices end up going higher. “Personally, I would take advantage of a little of this profit opportunity, if I could,” advises Hart. “If the market is offering me a $1.50/bu. profit, I would take some of that. As my predecessor, Bob Wisner, used to say, ‘It’s hard to lose money making a profit.’”