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Senior Contributor
Red Steele
Posts: 500
Registered: ‎07-23-2010
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The Case for $30 per bushel Corn

Let's take a walk back in history to 1970...a good acre of land was selling for $400 per acre....corn yields barely broke 100 bu per acre....the world population was at 3.7 billion...gold was at $35 per ounce....the price of corn was around a buck a bushel.

 

Now we are closing out the 2010 year, four decades later in history. THe world population has doubled to 7 billion or so. Gold is at $1300 per ounce. Good land is bringing around $6000 per acre. Corn yields have doubled, but then this just matches the growth in population so it is really a wash.

 

To equal the shock of $3 corn back in the 70's, what do you think the price of corn would have to go to, given all of these changes, most notably the deflated value of the American dollar? If there really is going to be a squeeze on supplies of wheat, corn, and soybeans, how high is high?

 

Personally, I got spooked by the $3 corn this last summer, and sold my remaining inventory of 2009 corn for $4 a bushel when the rally started. I had hedges to arrive in place on 2010 on about 75% of anticipated production for an average of about $4.30 per bushel on the corn, and $11 on the soybeans. So I still have some 2010 inventory to sell at the new price levels, and also have not hedged a single bushel of 2011, 2012, or 2013 production because I am really at a loss deciding how high these markets will go and what prices we will end up paying for crop inputs and land costs.

 

I think it is very easy to make a case for $10 corn, which would match the 1970's jump from $1 to $3, but do any of you think that the market will go a lot higher? How high will you try to keep some bushels available for? Or are we at the high right now, and these $5 bushels will look like a dream in a few months?

 

Last week I was offered a nice 120 bareland parcel for $5500 per acre. Will this look like a bargain in five years or a foolish blunder if I would buy it? If you factor in 40% or higher taxes on the principal to pay it off with after tax dollars, it ends up costing about ten thousand per acre of earnings to ever pay it off. Ouch.