From Agrimoney:
Some good news for US farmers on corn prices, at last.
Values may fall further – but not by that much, even if the US does produce a huge harvest this year, according to analysis by Macquarie.Some lowball figures have been going around this week for Chicago futures, as low as $3.50 a bushel.
That figure is "definitely out there", Jerry Gidel, chief feed grains analyst at Chicago broker Rice Dairy, said."Everyone seems in a race to the bottom," in price terms.'No longer works'However, a pricing model by Macquarie suggests that the floor may be significantly closer.
The bank has drawn up the model after finding that the traditional reliance on the stocks-to-use ratio – which offers a guide to the extent that buyers will need to pay up for supplies – "no longer seems to work".
"There is a link, but there is not as good a correlation as there used to be," Macquarie analyst Chris Gadd told Agrimoney.com.Plugging historic pricing levels, related to stocks-to-use figures, suggests that soybeans should be heading for $6 a bushel, and corn to about $2 a bushel.Production costsThe breakdown in the relationship is down to a step up in agricultural costs.As farmers will know, while higher crop prices in recent years have swollen their revenues, they have faced pressure from higher costs of many inputs (with the notable exception of fertilizers)....MORE
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