Cody Bills from Grain Hedge said tight corn supplies are driving the market now, but demand will be the key in the long term, “The USDA reduction in corn carryover is spurring the market higher, but we will need to see demand to keep prices high.” Bills speculates that ethanol production, left unchanged in the January report, may be reduced in the February report which could lead to a downturn in corn prices. Jim Riley, with Riley Trading, told HAT that technically the market is poised to move higher. But some economists are forecasting a swing to lower corn prices this spring and summer.
On Friday, the USDA forecast the average price of corn for 2013 would be $7.40, a figure Darrel Good, economist with University of Illinois, thinks is too high, “I don’t see any way we average $7.40 for the year. I think $7 is what we are going to average for the price of corn.” Good says that this summer corn stocks will be tight but, with the likelihood of a big corn crop, corn prices will fall, “I think we will start seeing some weakness in corn prices come June and July.”
Good sees corn prices staying high at least through the end of February, which will help set the level for crop insurance payments, “The spring insurance guarantee will be at least as high as it was last year at $5.68, and most likely higher.” He does not, however, think that will lead to an increase in corn acres. He added that is a good thing, “We don’t need more corn acres than we planted last year. If we have a good crop, we will have a surplus and lower corn prices by December.”
