The agricultural economists at the University of Illinois have been championing a new era for grain prices since the rise of ethanol as a major player in the U.S. corn market.
Scott Irwin is an agricultural economist from the University of Illinois. He and his colleagues believe grain prices have achieved a new higher plateau era. An era that started just after Congress mandated renewable fuels be ramped up in the U.S. gasoline supply over a ten-year period beginning in 2005. Irwin says it is the third such era.
The current range for corn is something like $3 dollars per bushel on the low end and $8.00 on the high. The highs come less frequently, usually driven by a weather related short-fall. Consequently, prices spend more time on the lower end of the range than the top end. However, he doesn’t really know why the prices are so range-bound.
The midpoint, by-the-way, of that range in Illinois since 2006 has been about $4.50 for corn. However, Irwin says corn prices over the last four years have averaged about $3.50 per bushel. He thinks this means corn prices are due to go higher. However, marketing on that belief is difficult.
Admittedly, Irwin has more confidence in his ability to predict the midpoint than the movement of prices. Mostly he says the upward moves are predicated on weather problems.
From the National Association of Farm Broadcasting News Service.