Darrel Good Quotations

Prices now appear to be settling into a trading range that may persist into the first of the calendar year.

That level of use is historically consistent and provides evidence that the size of the 2005 harvest has been accurately estimated.

The market will closely monitor planting progress, weather and weather forecasts, and weekly crop condition reports as they become available in order to judge 2006 production prospects. These factors will also provide producers with valuable information for gauging new crop pricing opportunities. The lesson of a year ago is that the weekly crop condition ratings are very valuable in judging U.S. average yield prospects.

The range of $0.505 is at the low end of historical experience. New highs in the spot cash price are certainly possible, particularly if weather concerns persist into the spring.

However, if bird flu results in a permanent reduction in world poultry production, an increase in red meat production might eventually be required, resulting in increased feed consumption in the long term. Domestic demand prospects also remain strong due to increasing livestock production and expanding ethanol production. These developments should support increased corn consumption well beyond the 2005-06 marketing year.

The cut in the export projection was a bit larger than expected, but the Census Bureau export report for December, released on Feb. 10, indicated that exports are lagging last year's pace by even more than indicated by the USDA weekly export figures.

Most analysts are on record with expectations of a decline in corn planting intentions and an increase in intentions for soybeans. The debate generally centers on the magnitude of the changes. Acreage of spring-planted crops, however, could deviate from intentions due to escalating spring wheat prices; potential for abandoned hard red winter wheat acreage to be replanted to other crops; changes, if any, in price relationships of spring-planted crops; and spring weather conditions.

The persistence of moderate to severe drought conditions in parts of Illinois, Iowa, and much of the southern Plains increases concerns about yield potential. As usual, forecasts of summer weather conditions are not consistent at this time.

There appeared to be no trend in the size or direction of forecast errors over the study period.

The price strength has been a little surprising given the magnitude of the surplus in U.S. corn inventories. However, over the past 32 years, the central Illinois cash price has never established a marketing year high in February, suggesting that even higher prices might be expected sometime over the next six months.