Corn prices may decline as farmers around the world increase acres to meet import demand after the worst U.S. drought in half a century cut supply from the largest grower, the U.S. Grains Council said.
“It will take one year, but it could decline from here if they see Brazil having a big crop this winter and in Argentina if they have good weather,” Julius Schaaf, an Iowa-based vice-chairman of the council, said in an interview. “Then you’ll see the market slowly descend into next fall.”
Futures surged to a record $8.49 a bushel on Aug. 10 as the drought scorched crops in a nation that produced about 36 percent of the world harvest in 2011-2012. Rising prices pushed up global food costs tracked by the United Nations in July by the most since November 2009.
The rally is already rationing demand. Export sales for delivery in the marketing year beginning Sept. 1 have slumped to 7.85 million metric tons as of Aug. 16, from 8.73 million tons a year earlier, U.S. Department Agriculture data show.
“I think people are backing away and waiting to see what this market is going to do,” said Schaaf, a fifth-generation farmer who has been growing corn and soybeans in Iowa, the top U.S. grower, for the past 35 years. “In every marketing year, there’s an opportunity to buy corn at a very reasonable price.”
About 22 percent of the U.S. corn crop was rated good-to-excellent as of Aug. 26, down from 23 percent a week earlier, and still in the worst shape since 1988, according to USDA data.
“I don’t know what other bad news you have to pile on corn to drive the price up,” Schaaf, 59, said in Phuket yesterday. “How much worse can it get.”
The Washington-based council, formed in 1960, develops export markets for U.S. corn, barley and sorghum and related products, according to its website.