2016 Corn Market Outlook

(Dan) I’m Dan O’Brien, Extension Agricultural Economist with Kansas State University. We spoke at the 2016 Corn School in Salina about corn market outlook for this current year of 2016. Of course, the big challenge is that we’re in the midst of very, very low prices right now and a lot of literally to a large degree, discouragement on ag producers part with regard to the selling price that they’re dealing with at current. Cash prices of $3.25 to $3.10, probably a dollar or more below their full break even cost of production. So, that’s a pretty challenging situation. Of course people, some people own their land outright, others may have low cash rents, others may have high cash rents, so the break even thing is a varying target. But generally it’s a lot, a pretty tight, low situation. So, we talked about a number of the factors to look for this year as we go here from January through February, March, April on through the growing season and into harvest that could affect the price of grain and for ag producers give them a profitable selling opportunity. So, that’s what we spent quite a bit of time on. Did talk about the broader drivers also in the grain market. And really sort of encouraging folks to have a broader perspective of how neither profits nor losses stay around for ever. In fact, they tend to undo themselves. If we have profits, we tend to react in economic ways to increase production, decrease usage to the place where we tend to drive, build up stock, drive prices lower. And so that’s probably what happened in 2013, 14, 15. Well now we’re in 2016 and so we have low prices, and what’s that doing? It’s giving signals to discourage production probably to increase usage. And eventually absent a major drought or something, these forces in themselves would tend to undo the low price situation, at least lead us back to more of neutral mode. But there is the risk this year, probably more than normal of changing the prevailing El Nino weather pattern to something along the lines of a La Nina. Again, we’ve had respected ag climatologists come to K-State and discuss this at length. So, that risk in itself may afford us, that uncertainty in the market may afford us with some pricing opportunities for both old crop and maybe even new crop as once we get out into June, July and August of this year. I think this is the year marketing-wise to play small ball. And in terms of to view 25-50 cent gains in cash prices as something to take advantage of, at least to the place where they can fulfill their cash flow needs. And then to keep in mind too that out into the summer timeframe when everybody else in the spring and summer is busy with field work and wherever, just that inability to deliver grain in a timely manner on many people’s part will probably give some opportunities for folks that are positioned with their trucks and their bins to be able to move grain. So, it’s really a time when close attention to whatever moves are out there on the one hand and I guess tightly wound management to be able to take advantage of delivery points wherever they may be and in a quick manner, when everybody else is too busy, probably will be a big issue this year moving off into the spring and summer months.

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