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 For the past two years, the average price of corn has been less
than $4.00 per bushel. Currently, prices below $4.00 are expected to
persist through 2017.
Such a projection, provided by the USDA, includes a reduction in
cost for planting the crop. According to experts, it would likely
require a reduction in the amount of corn planted combined with
increased purchases in the market for prices return to $4.00 per
bushel or higher in any consistent way.
As of the end of February, market projections depict farmers
planting fewer corn acres in 2017; fewer than the 94 million acres
planted in 2016.
The USDA long-term baseline projections for 2017 list a planted
acreage for corn at 90.0 million acres, which would lead to around
83 million acres harvested.
As for projected yield averages, USDA projections set the 2017 yield
at 170.8 bushels corn per acre. This assumes a year of average
weather conditions. Those projections would be altered if the
weather is bad enough during the growing season.
 Corn prices will also be influenced by international crop
production. For example, Brazilian production declined to 2.64
billion bushels in 2016 due to drought, but the projections for 2017
are expected to rebound back to 3.4 billion bushels. Altogether,
global production projections come in eight percent higher than
2016.
Corn export levels obviously vary each year. Over the last ten
years, corn export levels have ranged from a low of 730 million
bushels in 2013, to 2.44 billion bushels back in 2008. Corn exports
are influenced by trade policy and world corn production, and it is
too early to see what effects any changes made to economic policies
will affect exchange rates. It is possible that we could see higher
corn prices if we sell less internationally and demand increases.
It is also possible that we will see higher corn prices due to
higher necessity on the part of the domestic consumer. In the U.S.,
rates of purchased feed corn is expected to increase by nine
percent, and overall consumption is set to exceed production by the
end of the year. Keep in mind that the ability of livestock
producers to pay a higher price for corn could still be limited,
should we see significant changes in the livestock market.
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Additionally, as of February corn used for ethanol is expected to
increase to nearly 5.5 billion bushels. As of right now, other
domestic uses of corn are not expected to change much in 2017.
It appears unlikely that higher corn prices will come about solely
due to higher demand for corn on the part of domestic farmers. If
South American production increases as projected, we may need to see
a decline in U.S. acreage to push prices back up over $4.00 a
bushel.
In the simplest of economic terms, there will still absolutely be a
demand for corn, both domestically and in the international market.
But there will likely still be a sizable supply leftover, and corn
prices may remain at their recent levels for another year.
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Sources
Good, D.
"Weekly Outlook: Assessing the Potential for Higher Corn Prices."
farmdoc daily (6):205, Department of Agricultural and Consumer
Economics, University of Illinois at Urbana-Champaign, October 31,
2016.
Hubbs, T.
"Weekly Outlook: 2017 Corn Prospects." farmdoc daily (7):31,
Department of Agricultural and Consumer Economics, University of
Illinois at Urbana-Champaign, February 20, 2017.
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