Corn growers entered harvest expecting to store their crop and wait for higher market prices. The wait already is over, says Chris Hurt, Purdue University agricultural economist. "It looks like we'll have higher prices the rest of this year and into early next year," he says.
Soybean prices remain flat but likely will head up in 2007, as farmers plant more acres of corn and fewer acres of soybeans, he adds.
Corn prices surged recently when USDA announced a corn production estimate lower than what it had projected in September. Markets reacted quickly, catching some people by surprise, Hurt says.
"We're seeing corn prices through the central part of the Midwest approaching $3 a bushel, and that's very much at the high end of the USDA estimate for the year," he says. "Up until the last few weeks we've all been saying store the corn crop. Now, there should be some consideration by producers - especially those who don't have sufficient on-farm storage - to look at doing some pricing of that crop out of the field right now."
Hurt advises farmers not to abandon storing corn altogether because prices could climb even higher as more corn is turned into ethanol. He urges farmers to carefully watch market activity in the coming months and begin forming a market strategy for next year.
"We have some of the very best forward pricing opportunities that we have seen, perhaps, in many years," Hurt says. "A general recommendation right now is to not be too aggressive at forward pricing, particularly corn, for the 2007 season. That's largely based upon the tremendous growth in ethanol demand.
"Also, if we should have any kind of weather difficulties in the '07 marketing year, we're going to see substantially higher prices on both corn and soybeans."
The ethanol-related price spike could adversely affect corn use in the livestock industry, which relies on corn as feed. Livestock producers already are looking to increase soybean meal levels in animal rations while cutting some corn use, Hurt says.
"Here in the United States and around the world, we already are beginning to get very concerned about the high corn prices for the livestock industry," he says. "Because soybean meal is going to be pretty cheap relative to corn, we think we're going to see stronger soybean meal use and some reduction on the corn use side.
"The really big adjustment that's coming for soybeans is the 2007 crop in the United States, with the dramatic need to increase corn acreage - probably in the range of 8 million to 9 million acres. Most of those acres are going to come out of soybeans. All of these factors are beginning to put in place what means higher soybean prices as we go through this marketing year and, especially, into 2007."
Cash prices for soybeans are hovering in the $5.50-$5.75 per bushel range. Hurt predicts prices will rise another 50-60 cents by next spring.