Markets Now: Corn Crop “Isn’t There.” How High Can Prices Go?

Corn photos from MI Corn College 2014. ( Aimee Cope )

Mother Nature was far from kind to farmers this growing season, hence record prevented plant acres and a still unknown impact on yields. The market, however, seems to be preparing for less production with high corn prices and the potential to soar even higher.

“You’re seeing a crop that just doesn’t have it this year,” said Brian Doherty of Stuart Peterson to U.S. Farm Report Host Tyne Morgan. “You’re going to build a demand market and that’s what we’re starting to see surface in a more urgent way. As we get more toward harvest, the northern tier states are going to have a real issue with late crop. We’re probably going to see more emphasis on light test weight and high moisture—those type of things that really affect the global picture for corn supply.”

But, when will rising prices squelch demand?

“Not at the prices we’re seeing today but at the prices we could see,” said Darin Newsom of Darin Newsom Analysis. “The worst thing that ever happened to the U.S. corn market was when we went to $8 corn. We just shut down demand completely, and it took us a while to get it back.”

The customers he’s speaking with are comfortable with corn getting into the $5 range, but he believes they will start looking for alternatives if the grain gets into the $6-and-higher range.

“I think this stays more of a supply market than a demand market,” Newsom added. “Because if we start shutting down demand, Brazil is going to be more than willing to jump in and fill our shoes again just like they did last time.”

Cattle and hog farmers haven’t indicated prices are scaring them into selling herds just yet.

“I haven’t talked to one dairy, hog or cattle producer that says, ‘I’m going to start liquidating my herd,’” Doherty said. “These are still good values compared to five years ago. I think when we start reaching the $5 and $6 level we might need to be concerned. But this is different than a year like 2012—we started out at $5, and within 60 days we were at $8. So, if you didn’t get on board and catch it you were going to pay that high price for corn.”

He said 2012 was a learning year for buyers, particularly livestock producers. It’s likely more dairy, hog and cattle farmers are locking in lower prices now, for fear they could spike in the future.

While $8 might be something grain farmers are hoping for, neither analyst says they expect it to ever happen again. Demand destruction will happen first. In terms of locking in prices, both analysts say the $5 range is a good bet.