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can be converted to corn (and will be relatively unproductive the
first year).
In addition to lack of land, another problem is La Niña. La Niña
conditions in the Pacific Ocean are expected to continue into
the planting season. As a result, the northern Corn Belt may be
too wet and too cool for an early start to planting this year. Just
how much La Niña will impact crop production is, of course,
highly speculative. Nevertheless, the scenario painted by
meteorologists suggests that an unusually large harvest will not
be possible this year due to the wet and cold spring. Yields may
fall below the trend line again this year.
If the futures market is correct, there will be one more year of
high corn prices. Only with a surprisingly better yield would the
price fall from the average levels of this crop year.
“There is a great deal of confusion about the China
market. However, it is possible that China could become
the world's largest importer of corn over the next few
years.”
The worst case scenario would be a drought in the American
Midwest this year. If a drought should happen, the lack of
inventory would send prices up to over $10 per bushel ($400
per ton) and ethanol production would probably be shut down
on an emergency basis. There is a low probability of a drought
but it is not impossible. No matter what happens this year it can
be expected that corn prices will drop significantly in 2012.
There is now a powerful economic incentive to plant corn and
other grains all over the world. High grain prices will, in the end,
cure high grain prices.
42 | MARCH 2011 PLUIMVEE POULTRY BULLETIN
The total use of corn in the US can be no higher than the
harvest next crop year since inventory levels will be down to
pipeline levels. That makes prices more volatile than normal and
more dependent on yield. Even under the best scenario there
will be cutbacks in chicken production from what they otherwise
would have been. Meat prices will be higher and the resulting
demand from consumers will be lower than otherwise expected.
A wild card for corn demand is the status of Chinese corn
imports. The US Grains Council reported that Chinese corn
imports will increase to 6 million tons next crop year, up from a
previous estimate of 3 million tons. As usual, there is a great
deal of confusion about the China market. However, it is
possible that China could become the world's largest importer
of corn over the next few years.
The potential of China to import 10 million, or even 20 million,
tons of corn pales in comparison to the misguided ethanol policy
of the US government. That unsustainable burning of feed will
destroy 100 million tons of corn this year and take 40% of the
total US harvest.
Crop year 2010-2011 will have the highest average price of corn
ever, even higher than in 2007-2008. Although any prediction
about crop year 2011-2012 is highly speculative, it appears that
the price of corn may continue at nearly these high levels for
another year, followed by an inevitable drop in prices to lower
levels in the next crop year. It would take an extremely good
yield to bring the price down significantly in crop year 2011-2012.