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F' 3 ' Aditt:e ' l cleral Reserve Dank of Chicago June 23, 1972 CORN PRICES have been under downward pressure during the past few days. The declines largely reflect abundant supplies still available from last year's harvest glut and the generally favorable weather conditions for the 1972 crop. AlJut_ though corn usage in the first half of the current marketil year (October 1, 1971-September 30, 1972) has been sharply CtiRRL., Number 1175 SERtitt above year-ago levels, April 1 supplies totaled more than 3.3 billion bushels, nearly one-third over the year-earlier level, and far in excess of needs projected for the remainder of this marmarketing year. Exports are expected to show even stronger keting year. gains—perhaps reflecting the expected sharp reduction in Argentina's recently-harvested 1972 corn crop. These projections Corn prices received by farmers fell to less than $1 per bushel last November, following a record harvest which, couportend total carryover at the end of September of 1.25 bilpled with the previous year's carryover, pushed total corn suplion bushels—the largest in eight years and equivalent to around plies to 6.2 billion bushels at the beginning of the current marone-fourth of total corn usage anticipated for the current marketing year. Although prices recovered to the $1.08 to $1.10 keting year. range in December,and stayed at that level for the first quarter of this year, these prices were the lowest since the 1968-69 A large portion of the needed redemption of corn under crop year. The low price levels encouraged corn producers to loan likely has already occurred. Corn prices at the farm level place a record 919 million bushels of the 1971 crop under the trended upward in April and May, rising to $1.15 per bushel. Commodity Credit Corporation's (CCC) loan program by These higher levels were above loan redemption costs—loan May 1. This resulted in holding corn prices near the support support rate plus interest charges—no doubt encouraging some level, somewhat offsetting the price-depressing effects of the farmers not wanting to store their corn beyond the summer to large supply. Farmers have until the end of June to decide redeem their loans. whether they will redeem this corn, deliver it to the CCC, or reseal it for another year. So far this month, corn prices have fallen about 5 cents per bushel. In addition to the abundant supplies, favorable Low corn prices also encouraged livestock farmers to weather conditions for the 1972 crop no doubt have contrisharply expand feeding rates, and provided the incentive for a buted to the price declines. Although wet weather conditions near-record flow of U. S. corn exports. Domestic utilization early in the planting season slowed field work, conditions imof corn—primarily for feeding purposes—rose to 2.5 billion proved sufficiently in late May to allow farmers to about bushels during the October-March period, up 10 percent from catch up with the unusually early plantings of a year ago. the corresponding year-ed-rlier amount. This increase came This could mean that actual corn plantings may come closer in spite of no change in the number of animal feeding units. to the 68.5 million acres of plantings projected in the March 1 Planting Intentions Report than originally thought. Corn exports during the same period absorbed another 333 million bushels of corn—up from 277 million bushels in the first six months of the 1970-71 marketing year. Corn prices for the remainder of the 1971-72 marketing year will be mostly influenced by factors affecting the progress Demand for corn during the last half of the current marof the 1972 crop. The first official indication of the size of keting year is expected to continue strong, but free supplies— the new crop will come in the July Crop Production Report, corn not under CCC loan—coupled with a modest amount of scheduled for release on July 12. If actual plantings are withloan redemptions should be sufficient to meet the demand. in 1 million acres of the March 1 projections, further price Total corn usage for the last half of the 1971-72 marketing declines are likely. Although continuing ripples of USSR trade year is forecast at 2.1 billion bushels. This is about 100 million rumors may result in some upward price pressure, most offibushels less than free supplies available on April 1, suggesting cials now feel that any nearby trade agreement will be limited that only about 250 million bushels of corn will have to be to a "one shot" deal rather than the long-term contract which redeemed from CCC loan contracts to bring normal free carryhad received earlier speculation. over supplies up to the levels of previous years. Domestic corn usage during the April-September period is expected to about Gary L. Benjamin match the year-to-year gains recorded in the first half of the Agricultural Economist r • •