If you can correctly project U.S. acreage, China demand, South America's production, and U.S. livestock feed demand, experts say that you could tell the world where the corn and soybean prices will go in 2014.
Without knowing those numbers, marketwatchers have come to a consensus that 2014 could start friendly and end unfriendly for the soybean market while maintaining a bearish tone for the corn market.
In fact, you might want to sit down and read the price calls for corn. And when peeled back, the root of the sharply lower corn market projections comes down to a large corn ending stocks number (2.0+ billion bushels, that if realized, would be double the 2013 carryout. Translation; a big corn pile to try and chew through.
Shawn McCambridge, Prudential Bache Commodities LLC, senior grain analyst, says the 2014 corn market will reflect the major change in dynamics, regarding U.S. ending stocks nearly tripling compared to a year ago. Both the U.S. and world balance sheets, previously tight, are looking unfavorable for the corn market.
"The prospects of reaching previous highs or all-time highs are remote. I think the market is trying to see if we can trade in the sub-$4.00 per bushel level and even the low $3.00 level," McCambridge says.
It's worth mentioning that with domestic and international demand building, the market could be within one year of returning to previous high levels, he says. "If we see a drought in spring 2014, and China experiences crop-weather problems (being the world's number-one corn consumer), we could be right back to a tightness supply situation and turn the market into a bullish one once again," McCambridge says.
Having hit a decade low last year, the U.S. corn export market has a chance to pull prices out of the ditch, McCambridge says. "For U.S. corn exports, the Asian market, in particular China, has seen significant growth. And that area of exports will be watched in 2014," McCambridge says.
THROWING THE TOWEL IN
For the corn market, the worst case scenario could rear its ugly head in late summer, early fall, the Chicago-based analyst says. "Right now, the basis levels are helping getting supplies out of the farmers' hands and into the commercial users. But, if we get into the 2014 pollination period and production looks promising, but a fair amount of holding from farmers is occurring, that's when you could see prices get pretty ugly. That's when people will throw the towel in with little hope for upside price potential by holding onto the corn.