Process Management

News 171 views last update:6 Aug 2012

Corn prices near production costs

Corn futures have dropped sharply lately and now are close to cost of production.

In July corn futures at the Chicago Board of Trade nearly hit $8 per bushel, but now have plummeted to almost $4, with the sharpest drop of 30% in the last two weeks.

December contracts settled around $4.27 last week. Cash prices in the US average around $3.74 for corn and agronomists calculate the break-even price at $3.40.

The low prices will become a problem for producers if they continue into next year, when the break-even price would likely be above $4.

The break-even price varies in different parts of the country depending on yield potential, analysts said.

The low prices might prevent expansion of corn plantings, but according to economists farmers are "always optimistic" and will plant their crops regardless.

The current price drop is largely caused by extremely high fertilizer costs rather than low corn prices.

In the past, corn prices were low enough that producers knew there would be government assistance. The USDA website reads that the government price for corn is currently $1.95 per bushel.

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