“A number of factors continue to influence corn prices, with the market trying to weigh the negative versus the positive factors,” says Darrel Good, agricultural economist at the University of Illinois.
One of the leading uncertainties, of course, is whether Congress will renew ethanol incentives set to expire Jan. 1. Congress could choose either to renew the credit at the current or lower level or let the expiration stand. According to Good, all options are being debated without a strong indication of the likely outcome. A renewal of the tax credit, even at a lower level, would point to continued strong ethanol demand and the likelihood of ethanol production exceeding the mandate of 13.95 billion gals. in 2011, he says.
“Without the tax credit, ethanol production would presumably not drop below the mandate. The relationship between ethanol and gasoline prices would determine if production exceeded the mandate while the level of ethanol and gasoline prices would influence the price of corn,” Good says. He adds that current ethanol and gasoline prices favor ethanol blending (ethanol prices lower than gasoline prices) and would support corn prices at current or higher levels.
Long-term uncertainties are based on weather as always, along with export wonderments.
In the short term Good explains, “There is some concern about the large, long positions held by both index and managed funds and the possible negative impact of liquidation of some of those positions.” But, he adds prices will follow fundamental value over a longer period.
The season-average corn price of $4.80-$5.60/bu. remained unchanged from the previous months in the monthly World Agricultural Supply and Demand Estimates released Friday.