Although last Friday’s U.S. Department of Agriculture World Agricultural Supply and Demand Estimates left the projected 2011 carryover of corn unchanged from March, the corn market was far from dull after setting record-high prices last week. A close of $7.66¾ a bu on Tuesday in the May 2011 contract eclipsed the previous record-high close of $7.54¾ set in June 2008, only to see yet a still higher record close of $7.68 on Friday after what initially was termed a bearish U.S.D.A. report earlier that morning.
Concerns about tight old crop supplies spurred the current rally after the U.S.D.A. a week earlier estimated March 1, 2011, corn stocks below trade expectations. Last week’s U.S.D.A. Sept. 1, 2011, corn carryover projection of 675 million bus was down 60% from last year and a 15-year low. Although the number was well above the average trade estimate near 590 million bus and initially was termed bearish, corn futures traded higher on Friday with the nearby May contact approaching the record highs set earlier in the week. The strength reflected broadly bullish attitudes toward the market. Corn prices also derived support from 2½-year-high crude oil prices and ongoing weakness in the value of the U.S. dollar.
The bullish atmosphere raised the specter of “what if,” including talk of $10-a-bu old crop corn this summer. It is not known if or when high prices approaching that level would begin to dampen demand. It certainly might prompt farmers to further boost corn plantings, which the U.S.D.A. forecast at 92.2 million acres in its Prospective Plantings report. The seedings forecast was 4% larger than the 2010 corn area and would constitute the second-largest corn area since 1944.
The record-high corn prices raised concerns about prices of other commodities, including wheat, which draws interest as a feed grain when corn prices are high. On a per-lb basis, corn prices were higher than soft red winter wheat prices last week. Tuesday’s record corn futures close of $7.66¾ a bu reflected a per-lb price of 13.69c compared with soft red wheat’s futures close of $7.86¼ a bu, or 13.10c a lb that day. On April 7, when corn futures hit an intra-day high of $7.73¼ a bu, Chicago’s soft red winter wheat contract closed at $7.73¼ a bu (although corn closed at $7.59 that day). Corn futures prices were last above soft red winter wheat futures prices in June 1996 at a 37c premium.