Corn-price increases will eventually decline: expert
November 18, 2010
by Meat&Poultry Staff
TUCKER, Ga. – Recent increases in corn prices will slow and then decline, although just how much remains to be seen, said Richard Brock, Brock Associates, while speaking to feed ingredient purchasing managers at this month’s US Poultry & Egg Association's Grain Forecast and Economic Outlook Conference.
"This week we saw the highest one-day volume in corn trading in history," Brock said. "Everyone is bullish right now, but this is not the time to be a panic-buyer. Six months from now we'll have a surplus of $6 corn."
The current corn market will "fall hard and fall fast" once it turns, Brock predicts, but the question is when and how much. Based on past history, "big bull markets have always been followed by big bear markets," he said. Brock recommends "buying enough to get through the spring because later next year will be a bear market."
His farm price forecast for 2010/11 is $4.75-$5.75, with 154 bushels per acre; and 2011/12 is $4.20-$5.50, with 166 bushels per acre.
Eric Scholer, Express Markets, said during his Poultry Industry Outlook presentation that broiler production will continue increasing in 2011, until later in the year despite high corn prices, because of planned schedules for placements. Production increase for 2011 will be approximately 2%. Russia and China exports will continue to be uncertain, after a decrease this year of 30%. But the total drop in exports will be only 10% due to picking up other markets.
In 2011, breast-meat prices are expected to be only slightly lower due to less total meat supplies. Leg-quarter prices for 2011 will be a little stronger than this year, but not up to 2009 prices.
"Our economy is damaged and still has serious problems," said Economist Dr. Don Ratajczak during his Economic Forecast for 2011 presentation. "And the financial sector is still weak, but it is beginning to get better and will soon start generating capital. Unfortunately, enough jobs still are not being created."
The stimulus for the US economy was "poorly handled," Ratajczak said. "For example, stimulus money should have been given to the worker building the bridge,” he added. “He would actually spend it, plus we would have the bridge."
Uncertainty is still a big factor, Ratajczak warned –especially about tax law (he predicts a two-year extension of full tax cuts) and the health-care law, along with its impact on employers.
Ratajczak forecasts 2% growth for the US economy in the first half of 2011, and 4% in the second half. Housing will start to improve and employment will begin to increase – one-and-a-half million to two-million jobs, mostly in the second half. Interest rates will also start increasing in 2011. Next year the stock market will increase 10%-12%, although the value of the dollar could change things.