Last year a strong bull market run continued in grain prices, new all-time highs in corn futures prices were set. Does 2012 have the same momentum behind it? Let’s take a look at some of the factors that allowed the bull market to stay in place. Ultimately when the bull market started during July 2010, demand driven markets propelled prices higher. Demand from both domestic and foreign markets was picking up following for wheat, corn and soybeans. World wheat supplies stumbled with the drought that the Black Sea region faced. As the fall of 2010 unfolded US corn production failed to meet expectations and producers harvested a 12.4 billion bushel crop. The strong demand ate away the crop to a tight 840 million bushels, resulting in a very tight 6.6% ending stocks to total use. For 2011 crop prospects, there was the possibility to pick up more corn acres during the spring but wet growing conditions in the eastern Corn Belt and some delays in planting throughout the Midwest meant plantings were about 92 million acres. That is the 2nd largest US acreage. If more acres were planted though it could have softened the market as extra acreage would make ample supply less risky. That could be a huge factor in 2012, if returns per acre remain where they are, at much higher returns from corn than the competing crop (typically soybeans) then there could be another big shift in acreage this spring. Time will tell if the US surpasses the record 93 million planted corn acres of 2007. If demand is held constant and 94 or 95 million acres of corn were planted how much less risk is there in 2012 production meeting demand needs?
Soil Science Extension
University of Wisconsin Madison