… or will production again exceed expectations, extending the run of price declines? In the first of a series of ag price outlooks, leading commentators give their views
As is common this time of year, the experts are trotting out their opinions about what’s going to happen in the upcoming year in the agriculture sector. And as for that question up there in the headline, the answer is no.
The only analyst who seems at all optimistic is McGlone from Bloomberg, and his comments are a bit, well, odd, frankly. McGlone’s comments seem to be made by someone who hasn’t read a market report recently. He thinks ethanol demand is going to hugely increase, China is going to import US ethanol at a high level, and that is going to drive prices up. And none of that is really true. There is no huge increase in demand for US ethanol from China, ethanol use in the US has flatlined. And the “robust” global demand for corn he talks about? If that “robust demand” actually existed we wouldn’t be seeing record levels of corn sitting in storage.
As for the rest of the sources quoted in the summery, none of them are very optimistic about corn prices. Rabobank seems to think corn will reach $4 or better, but it’s basing that on are, I think, some pretty sloppy speculations about decreases in corn acreage.
Most of the others don’t see corn prices going up any time soon. Unless some kind of major disruption occurs like a severe weather event like a widespread drought, corn prices aren’t going to be moving up and may even move down a bit.
I was tempted to add in a bit about the whole ethanol industry here at the end, but I think I’ll leave that for an upcoming article. I’ll leave you with this thought, though. The entire ethanol industry is going to utterly crash and burn within the next twenty years or so, so I wouldn’t invest your 401(K) funds in it if I were you.