NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

January 28, 1999

The Market Advisor: Modest Recovery in Corn Prices Expected this Spring

George Flaskerud, Extension Crops Economist
NDSU Extension Service

A modest recovery of corn prices is expected in the months ahead to at least $2.40 in Chicago May corn futures. Prices at these levels would represent an increase of 20 cents above the December lows.

USDA left the export projection unchanged in its January Supply and Demand Report. This was expected since corn-export commitments (actual exports plus unshipped sales), to date, are ahead of last year and only a little below the five-year average. In addition, production in Argentina is projected to be down 5.9 million metric tons from a year ago.

USDA did raise ending stocks of corn but only by a small amount. Feed use was reduced in anticipation of lower 1999 pork production. Ending stocks of corn are now projected to be about 19.5 percent of total use, versus 18.3 percent a month ago.

A stocks-to-use ratio of .195 suggests that the May futures price should reach at least $2.40 during April. The April average was $2.75 in 1990 when the ratio was .164; $2.56 in 1991 when the ratio was .172; $2.50 in 1995 when the ratio was .169; and $2.50 in 1998 when the ratio was .178. May futures traded at $2.20 on Jan. 19.

Looking ahead to the next marketing year for corn, it is likely that the stocks-to-use ratio for corn will be about the same as it is now without weather problems. December corn futures in 1999 could average about $2.20 during October. December futures traded at $2.36 on January 19.

December corn futures should exceed $2.60 when May futures reach $2.40. A scale-up marketing plan beginning at $2.60 would make sense for anticipated corn production in 1999, considering the downside risk.

###

Source: George Flaskerud (701) 231-7377

Editor: Dean Hulse (701) 231-6136