Projected US farm corn prices in 2015/16 are US$3.79 per bushel, a dip of 10 cents compared to last month, according to December forecasts released this week by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri, AgWeb reports.
Looking forward, prices are expected to remain below the cost of production, with FAPRI forecasting a price of US$3.98 per bushel by 2018/19.
While those numbers aren't optimal, those prices are higher than the US$3.50 per bushel forecast for 2014/15. The projected decline in corn production is contributing to an increase in prices, but that price growth is also being moderated by the decline in oil prices, according to Pat Westhoff, FAPRI director.
The good news? Lower oil prices should lower fuel costs to farmers as well as reduce corn prices. Still, the oil price crash overall will probably improve net farm income more than it will lower crop prices.
“The biofuel side of the story is much more complicated and uncertain but potentially more important,” Westhoff says. With lower gasoline prices, people will probably drive more, which should push up the use of gasoline and ethanol in 10 percent blends.
But there is a good chance this will be outweighed by two opposing factors, according to Westhoff.
1. Lower oil prices will make ethanol more expensive relative to gasoline, and that probably reduces the already small amount of ethanol used in E-15 and E-85 fuel.
2. With ethanol more expensive relative to gasoline, the corn-based fuel probably makes it less attractive to other countries, so US ethanol exports that are now the largest in years may well decline. Ethanol exports would be less than they would have been with higher oil prices, he explains.
“These negative effects on ethanol demand are likely to outweigh the positive, so the net effect is less demand for ethanol, which translates into lower corn prices,” Westhoff says.
Looking at other crops, FAPRI projects 2014/15 soybean prices of US$10 per bushel, unchanged from last month, but that drops to US$8.78 for the 2015/16 marketing year. Prices are likely to remain below US$10 per bushel through 2018/19, FAPRI says.
“Continued high US soybean acreage in 2015 and large global supplies weigh on projected soybean prices,” Westhoff says.
Wheat prices have been higher than anticipated so far in the current marketing year, with FAPRI’s 2014/15 projection calling for prices of US$6.01 per bushel, up 11 cents from the November estimate. But for 2015/16, Westhoff says large global grain supplies reduce wheat prices almost US$1 per bushel at US$5.05. Prices rise in subsequent years, but remain below US$5.50 through 2017/18.
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