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Corn prices hit four year low this summer

Chicago Board of Trade

Last week at the International Plowing Match in Simcoe County, it seemed like farmers had one thing on their mind when they visited the Grain Farmers of Ontario: when will the price of corn go back up? It’s true that the price of corn has suffered lately—by July, it had reached a four year low in Ontario.

The single biggest factor keeping the price of corn lower than usual was the early expectation of a record crop in the United States. Like it often seems is the case with all farming questions, the weather is at the root of this—except in this case, it’s actually been the case that the weather was too good. A long summer in much of the U.S., which is the world’s single largest corn producer, has suppressed market prices for corn all summer. As the U.S. harvest has come in without any major issues, the price has stayed down. Even unrest in Ukraine, the world’s fifth-largest producer of corn, hasn’t affected the world supply enough to counteract the massive U.S. crop.

Ontario is Canada’s largest corn producer, and it produces significantly more than the next-largest province, Quebec. About half of Ontario’s corn is used for animal feed, while the other half is sold to companies that produce ethanol to be blended with gasoline. Philip Shaw, who writes market trend commentary for Grain Farmers of Ontario, notes that demand for ethanol production is sharply on the rise, which has prevented corn prices from falling even lower.

There are a few factors that might help farmers get a better price for their corn at a local level this year. Like this year’s Ontario soybean crop, planting was delayed this spring; combined with the early expectations for a record U.S. harvest, many farmers avoided planting corn altogether. Some farmers who did grow corn this year are hopeful that a local crop which is smaller than usual will help them market theirs to local processors. Should they be willing to pay a small premium to save on the expense and inconvenience of importing plentiful U.S. corn, processors will have a smaller local crop to buy from.

While the crop largely hasn’t been harvested yet (in much of the province, field corn still needs at least two weeks of frost free weather), it’s unlikely that the price will improve any time soon. Farmers will be keeping an eye on news about the U.S. harvest. As Shaw points out, it appears 2014 has been the year that supply caught up to a period of increased demand from 2007-2013. With the uncertainty of a late harvest, expect cash prices to fluctuate daily well into the season.