Planting from March to June will reach 97.73 million acres, up from a 75-year high of 97.155 million in 2012, according to the Bloomberg survey. The USDA forecast a 0.7% drop to 96.5 million acres. While the drought cut output 13% to 10.78 billion bushels last year, improved weather and better yields in 2013 will help boost stockpiles before the 2014 harvest to 1.795 billion bushels, the most since 2006 and up from a 17-year low of 632 million this year, according to the survey.
Hedge funds and other large speculators cut their net-long corn positions, or bets on higher prices, by 31% in the week ended Feb. 12 to 126,363 futures and options, the biggest reduction since June, U.S. Commodity Futures Trading Commission data show. Holdings are down from 279,010 contracts on Dec. 4.
Most farmers “expect prices to ratchet lower,” said Bayliss, the Ohio farmer. “I’m looking for cash prices to fall below $4.50 and hope it’s not $3.50 or $2.50.”
The USDA, at its annual outlook conference today in Arlington, Virginia, forecast prices will plunge 33% to average $4.80 in the year ending Aug. 31, 2014, from $7.20 a year earlier.
With a return to normal yields this year, “a rebuilding of stocks and lower commodity prices would be expected in the fall,” Joseph Glauber, the chief economist at the USDA, said Jan. 14 at a Senate Agriculture Committee hearing in Washington.
Drought conditions are lingering in the Great Plains and Midwest, the main growing area. About 83% of the six- state region from Kansas to North Dakota has soil moisture below 10% of normal, with some at zero, and where water shortages and crop damage are likely, according to the U.S. Drought Monitor. A year ago, 5.5% was in drought.
Severe drought covers the entire state of Nebraska, the fourth-largest corn grower, more than half of Iowa, the biggest producer, and 70% of Minnesota, ranked No. 2, the monitor shows. Drought conditions will persist in the Plains and Southeast through April 30, the government said Feb. 7.
“The market is not paying attention to the potential problems from dry soils,” said Dan Basse, the president of AgResource Co. in Chicago. “If we don’t see an improvement in the weather and soil conditions by April 10, the market will respond just like last year. It’s premature to be talking about sub-$5 corn when parts of the Midwest need 6 inches to 14 inches of rain to restore soil moisture.”
Dry soil across the western Midwest will limit the rebound in output, leaving prices in 12 months at $6, Goldman Sachs Group Inc. said in a Feb. 10 report. Standard Chartered Bank said in a Feb. 14 report that corn will average $6.80 in the fourth quarter, 21% more than the December futures.
After predicting record crops, the USDA revised its forecasts lower in 2010 as fields were damaged by heavy rains during planting and a later heat wave, and again the following two years because of droughts.