Fundamentally Speaking

Spot corn is in rarified territory at over $8.00 per bushel.

The recent high in the May 2022 contract at $8.20 per bushel (bu) is not that far at all from all-time high seen in August 2012 of $8.44/bu at the peak of the horrific drought that season.

It seems like just a matter of time until some 2022 contract takes that out, for in addition to the seasonals being positive, there is no shortage of bullish factors given the war in Europe, lower South American corn production than forecast earlier in the season, a shockingly low March 31 planting intentions figure of 89.5 million acres, a 2022 USDA yield forecast already 4.0 bushels per acre (bpa) above last year's record and so far to date, a slower than normal pace of spring seedings.

The question then is how high could corn prices go, though much will depend on the duration and outcome of the Russia-Ukraine military conflict, how the Argentine and particularly the Brazilian second season corn crops finish out and what happens during the U.S. growing season.

To provide some perspective, this graphic shows the actual and 50-week weighted average of weekly spot corn prices in $/bu on the left-hand axis and the percent difference between the two on the right-hand axis.

This kind of average gives more weight to the more recent weekly corn prices as opposed to the ones in the more distant past.

Using the most recent weekly close at $8.04 resulted in the 50-week weighted average for corn to be $6.34 per bushel, a 26.8% difference, or in other words current corn prices about 27% higher than the weighted weekly corn average with values going from the end of April 2021 to prices as of mid-month for this April.

The array of positive price drivers already cited has been instrumental in boosting corn prices sharply since the year began as at the start of 2022, spot corn was valued closer to $6.00 per bushel, just 3.4% above the 50-week weighted average then of $5.80 1/2.

While the current premium of current prices to the 50-week weighted average seems high, it has been exceeded in the past including a 41.9% premium in November 2006, a 44.3% premium in June 2008, a 40.5% premium in October 2010 and the largest premium and most recent example seen last May when the weekly spot corn price of $7.73 was a whopping 56.8% of the weighted 50-week average at the time of $4.93.

We should also note that the highest 50-week weighted average was in Mach 2013 at $7.27 as weekly corn prices in excess of $7.00 per bushel were seen for a large part of 2012 into the first quarter of 2013.

If corn prices were to trade 40% or more above the 50-week weighted average that at minimum would put corn values closer to $8.88 per bushel.

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