Analyst sees dark outlook for winter corn and bean prices

US - As the cartoon character, Snoopy used to put it when he tried writing his Great Novel from his doghouse, "It was a dark and stormy night."

That described the weather perfectly Monday evening when the farmers who belong to the Indianola, Iowa, Marketing Club braved freezing rain to hear the latest crop price outlook from Iowa State University farm management specialist Steve Johnson.

Johnson"s message was dark and stormy, too. Or to be more precise, dark and dull. At least for corn, with 17% of it piled on the ground in Iowa and with a projected carryout next August of 2.3 billion bushels the largest since 1988.

"Futures don't do anything in the winter," Johnson said, suggesting that anyone hoping to salvage marketing of 2005 corn would be better off to head south between December and March and take a vacation. If futures follow normal patterns after a big crop, they'll chop along about where they are now, the basis will narrow and with it, LDPs will shrink.

And, when farmers need money next February to make payments cash prices could collapse again. "The late winter could get ugly, I would anticipate," Johnson said.

The best predictor of corn prices for the current marketing year is ending stocks, Johnson said, showing a chart that illustrates the inverse relationship between prices and stocks. The most recent USDA supply-demand estimate projects an average farm price for 2005 corn of $1.60 to $2.00. Iowa State University economist Bob Wisner gives 60% odds of a marketing year average price of $1.80 a bushel.

calendar icon 7 December 2005
clock icon 1 minute read
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