By MICHELE F. MIHALJEVICH
Indiana Correspondent

FORT WAYNE, Ind. — Extremely tight corn and soybean stocks; uncertainty over weather, exports and ethanol; concern about crop acreage.

These issues weighed on the minds of seminar presenters as the 22nd annual Fort Wayne Farm Show kicked off with a grain market outlook.

“These are the highest prices we’ve ever seen during the farm show,” said Jon Cavanaugh, marketing director with Central States Enterprises in New Haven, Ind.

“It’s a very unusual situation. We’ve never seen anything quite like we have today.”

Cavanaugh and his seminar partner, David Kohli, market analyst with Allendale, Inc., of Fort Wayne, spent a good deal of their Jan. 18 session discussing ending stocks as reported in the recently released 2010 final crop report from the USDA.

A drop in corn ending stocks to 745 million bushels could be a problem if demand increases, Cavanaugh noted, adding the corn stocks to usage ratio of 5.5 percent is also a concern. Stocks were 1.7 billion bushels at the end of 2009, when the stocks to usage ratio was 13 percent.

The corn stocks to usage ratio is the tightest since 1996, when it was 5 percent.

“If the (stocks numbers) drop to 650-675 million bushels in the pipeline, then for all practical purposes, it’s gone. We’re out of corn,” he explained.
That could happen if corn exports increase or if corn estimates for ethanol production are low, he added.

“I can see it dropping below 745 (million bushels), which would be very close to the tightest ever.”

Ending stocks of soybeans are also down, according to the USDA report. They dropped from 151 million bushels at the end of 2009 to 140 million bushels at the end of 2010, while the stocks to usage ratio dropped from 4.4 percent to 4.1 percent.

“Most market analysts have the final carryover going below 140, maybe as low as 110 (million bushels),” Cavanaugh stated. “It could become every bit as tight as corn and it has the potential to be the tightest ever.”

The USDA’s final crop numbers were surprising because most reports over the late summer and fall didn’t indicate production would drop as much as it did, Cavanaugh said.

The August 2010 report projected an estimated yield for corn of 165 bushels an acre nationwide, which would have been a record.

The October 2010 report dropped the projected yield to about 158 bushels an acre. The final number was 152.8 bushels an acre.

“It was an absolute shocker in October when they took the yield estimate down,” Cavanaugh noted. “The final numbers took more than 12 bushels an acre off the yield. It took us from a comfortable situation on supplies to a tight situation.”

Parts of the United States could be affected by the La Niña weather pattern this summer, Kohli stated. The pattern, which has lasted longer than expected, is already causing dry weather in Argentina and southern Brazil, he added.
La Niña, which may last until this summer, could bring drier weather across the plains and into the Midwest after a wet spring, Kohli said.

More acreage devoted to corn and soybeans are needed not only in the United States, but around the world, Kohli and Cavanaugh agreed.

“We have a serious acreage problem,” Cavanaugh explained. “We need to cut demand or bring acres in from somewhere. This is a driving force in the market. We’re headed for a train wreck with these numbers.”

Pastureland could be converted to cropland or land in the Conservation Reserve Program (CRP) could be released early from contracts, Kohli said. “It’s not the most productive land. I kind of doubt that this will happened but it could.”
Kohli said he expects new crop corn prices around the $6 range, and old crop corn not less than $8, while bean prices could be around $16. Cavanaugh said he expects $7 or more for corn.