 
November 24, 2003
CORN PRICES HAVE BEEN REMARKABLY STABLE
Corn prices have been in an extremely
narrow range for the past 14 months. Since September 24, 2002, the
average daily cash price of corn in central Illinois has traded
between $2.00 and $2.505. The average monthly price of corn received
by U.S. producers from October 2002 through September 2003 ranged
from $2.15 to $2.35 per bushel. The average for October 2003 will
be revealed on November 28 and will likely be near $2.10. December
2003 corn futures have traded between $2.095 and $2.60. The trading
range of $.595 is the third smallest of the past 31 years. The range
was only $.5425 for the December 1987 contract and $.55 for the
December 1991 contract. The December 2004 contract has had a trading
range of only $.275.
Relatively stable corn prices since the fall of 2002 have come
during a period when soybean and wheat prices have been much more
volatile. Since September 24, 2002, for example, the average cash
price of soybeans in central Illinois has had a trading range of$2.52
and the daily cash price of soft red winter wheat at St. Louis has
had a range of $1.45 per bushel.
So far in the 2003-04 marketing year, corn prices have been somewhat
higher than expected with a record U.S. harvest near 10.3 billion
bushels. Support has come in part from large exports and export
sales and anticipation that exports will remain large. The USDA
has increased the 2003-04 marketing year U.S. export projection
from 1.8 to 1.875 billion bushels, 283 million bushels (17.8 percent)
above last year’s shipments. Through the first 11.5 weeks of
the year, the USDA reports that 400 million bushels of U.S. corn
had been inspected for export shipment. That total is 23.5 percent
above the total on the same date last year. The increase in shipments
has been led by Taiwan, Egypt, and Mexico. As of November 13, the
USDA reported outstanding export sales of U.S. corn of 403 million
bushels, compared to sales of 320 million bushels on the same date
last year. Outstanding sales are up sharply for all major buyers
of U.S. corn – Japan, Taiwan, Egypt, and Mexico. In addition,
outstanding sales to unknown destinations stood at 80 million bushels,
more than double the sales to unknown destinations reported last
year. The USDA continues to receive reports of sales to unknown
destinations under the daily reporting system, with another 9.4
million bushels reported on November 24.
It is the large sales to unknown destinations that is of major
interest to the market. These large sales fuel speculation that
China may be reducing export commitments due to smaller supplies
and higher internal prices, even though shipments through October
remained very large. If that is occurring, or does occur in the
near future, the U.S. would expect to make much larger sales to
South Korea. A return of South Korea to the U.S. corn market, along
with larger sales of U.S. corn to other Chinese customers, could
propel 2003-04 U.S. corn exports above current projections and sustain
U.S. exports at a high level beyond this year.
U.S. corn supplies are large enough to accommodate use this year
at a higher level than currently projected by the USDA. With use
for all purposes projected at 10.025 billion bushels, year ending
stocks are expected to be at 1.35 billion bushels. That is, use
could exceed current projections by 350 million bushels and still
maintain ending stocks near 1.0 billion bushels. The margin for
increased use may be even a little larger if the January corn production
estimate exceeds the November forecast. However, with world corn
consumption continuing to expand and inventories of corn outside
of the U.S. at much lower levels, the size of the 2004 U.S. crop
becomes increasingly important.
It appears that the corn market
is in position to generate a wider price range than has been experienced
over the past 14 months. Since the beginning of the 2003-04 marketing
year (September 1, 2003) the average daily cash price of corn in
central Illinois has traded between $2.00 and $2.395. The marketing
year range in that price has been less than $.50 only twice in the
previous thirty years (1990-91 and 1992-93). Over the past 5 years,
the marketing year range has varied from $.60 to $.80 per bushel.
If $2.00 is the marketing year low, the highest price of the year
would be expected to be at least $2.60. Typically, we would expect
the highest price of a marketing year with such a large crop to
occur in the spring/summer following harvest. The timing of a new
high this year, if it does occur, is less certain. Export demand,
acreage intentions, and weather will all influence price patterns.
A new marketing year low price, if it were to occur, would not be
expected until late summer of 2004 under the influence of another
large crop. The trading range of December 2004 futures will also
likely exceed the current range of $2.325 to $2.60.
Issued by Darrel
Good
Extension Economist
University of Illinois
 
|
