Analyst sees possibility of $3.50 corn by June

by Laura Lloyd
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CHICAGO — Amid expectations that the U.S. Department of Agriculture will raise both its 2013 corn production and ending stocks estimates from December levels in its January Crop Production and quarterly Grain Stocks reports on Jan. 10, Roy Huckabay, executive vice-president at the Linn Group, said he expects continued declines in March corn futures prices in February and even lower levels for July corn futures by June.

He said February is typically a time for relative price weakness in corn, and he sees the nearby contract trading in a range from $3.80 to $4.10 a bu. That would represent a decline of as much as 11% from current levels.

Farmers, he said, “think they have missed the boat” on the best old-crop corn prices for the foreseeable future, despite levels being much lower than in 2012, a drought year.

He predicted July corn trading at levels of $3.50 to $3.80 a bu in June, assuming 2014 planted acres hold at levels near 2013, which he expects. Prices as low as $3.50 a bu have not been seen since June, 2010.

“I’m bearish on corn,” he said.

The Wall Street Journal compiled analyst estimates for corn production in advance of the January Crop Production report being released Jan. 10 at noon ET. The average of 20 estimates was for total U.S. corn production of 14.053 billion bus, up from the U.S.D.A.’s December estimate of 13.989 bus, already record large.

Mr. Huckabay isn’t swayed significantly by recent talk that low corn prices will translate to hefty increases in soybean acres, although he acknowledged that marginal corn areas in places like North Dakota would be likely to be planted to wheat or soybeans in 2014.  And he noted that Monsanto recently has seen a decrease of 7% in seed corn sales while soybean seeds have climbed 16%.

Nonetheless, he said many producers are leaving their options open by not applying fertilizers designed especially for soybeans. And he added that farmers  that harvested corn yielding, say,  220 bus an acre in 2013 were not likely to cut back on their corn plantings going forward, because returns still surpassed those of soybeans.

He added that the U.S.D.A. was expected to raise its ending stocks for corn in the quarterly Grain Stocks report on Jan. 10 and that number may have a bigger impact on the market than the production number.

The Wall Street Journal poll of analysts’ estimates predicted average corn ending stocks at 10.77 billion bus compared to 8.03 billion bus in December 2012.

As for soybeans, he said “We are using beans way too fast” and he predicted that Southeastern feed manufacturers would be importing South American beans by June or July.
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