As 2018 corn planting is underway in the Northern Hemisphere, key risks are developing that can drive price volatility and potentially sustain elevated grain prices through the 2018-19 season, according to the RaboResearch report “Don’t Fall Asleep Behind the Risk Management Wheel: Modelling the Price Risk for Corn.”
While demand is staying firm, the projected corn acres and current global corn stocks are declining compared to the past few years. The report notes that this environment provides little room for production deterioration in the 2018 growing season. Any additional loss of production through acreage or yield loss will put pressure on corn prices.
The Rabobank Pricing Probability model forecasts that there is now over a 50 percent probability that CBOT prices will remain near to or exceed $4 per bushel through December, and 2018/19 corn has a 24 percent chance of sustaining greater than $4.70 per bushel.
“The CBOT corn price has not reached $4 since May 2016,” says Sterling Liddell, vice president and senior global analytics specialist for RaboResearch. “For the past two years, the market has not moved significantly to provide corn growers many good selling opportunities. There’s a good chance that we will see more movement this year.”
In the report, corn growers are advised to stay alert for marketing opportunities at key events, such as planting progress, pollination and yield estimates. If the projected U.S. corn acres remain at current levels, there is high risk for market volatility. Should any weather events or conditions occur that could impact yield, markets are expected to substantially react.
Beef and swine producers, Liddell suggests, should take advantage of good opportunities to lock in prices, since the risk has gone up for feed prices to become higher.
