Thursday, December 4, 2014

Illinois corn yields set prices?

 More than Illinois it's the world

 We have finished with corn harvest with good yields.  Most of the corn went into storage that was built on the farm or contracted storage with local elevators.  Some needed to be delivered out of the field straight to market.  Users of corn are confident that supplies will be plentiful for this year and most likely for several more.  While some are buying at favorable prices there seems to be no hurry to buy needs further out.

Yes Illinois yields have increased supply which lowers prices.  There are also other huge factors now that were beyond the farmers control.

1.  The dollar is 10% higher now in the world market which means the overseas buyers get 10% less corn for the money.

2. Oil producing nations (OPEC) have decided to increase supplies of oil which lowered the gasoline prices.  Lower gas prices mean less ethanol blended into gas and less corn bought to produce that ethanol.

3.  The Beef herds have still not recovered from drought forced liquidation and are consuming less corn for feed.

Grain production has had some good profits for several years but the near-term outlook is worrisome to most.  The livestock producers went through the opposite.  High corn prices led to losses of all profit and now lower feed costs are providing the return to profitability.  I was amazed at how much efficiency increased in pork production when things were bad.  I call it forced efficiency.  Farmers were forced to take another look at everything they do to survive the market.  I see this happening in grain production now.  With no way to control grain prices, limited control of land costs, seeds, and other inputs more farmers will look at sharing their resources of time and equipment to maximize efficiency.    

                                                                                  Serving together, Dean  

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