"Corn prices received by producers have been reported 40¢-50¢/bu. below prevailing cash market bids reflecting apparent deliveries of grain that was forward-priced below $6/bu. ahead of planting this past spring," say analysts in the December World Agriculture Supply and Demand Estimates (WASDE). "Declines in futures prices since early November have also tempered the outlook for seasonal price gains over the coming months."
Earlier this month, Steve Meyer and Len Steiner explained in the CME Group's Daily Livestock Report that demand (exports especially) relative to global production and continued instability in the global economy stand out as the main drivers to the recent weakness in corn prices.
"For corn, it appears that 2012 will begin with a continuation of weak export demand," says Darrel Good, University of Illinois ag economist. "Although China has purchased 95 million bu. of U.S. corn and Mexico has bought more U.S. corn than a year ago, total sales are lagging the relatively slow pace needed to reach the USDA projection of 1.6 billion bu. for the marketing year.
"Abundant supplies of wheat and feed grains in the rest of the world are providing stiff competition for U.S. corn," Good explains. "The current year is ending with very strong demand for corn for ethanol production, but demand after the first of the year is much more uncertain due to the expiration of the blender's tax credit. Longer term, the rate of growth in corn-based ethanol production will likely be limited due to peaking renewable bio-fuels mandates and limited production capacity."
According to WASDE, year-end corn stocks are projected 5 million bu. higher at 848 million bu. As such, the 2011-12 season average corn price is projected 30¢ lower on both ends of the range to $5.90-$6.90/bu.