Economic and Marketing INFORMATION
FOR
INDIANA
FARMERS
Prepared  by Members  of the  Agricultural  Staff of  Purdue   University,   Lafayette,   Indiana,   May   25,   1956
This Corn Price Riddle!
by
N. S. HADLEY and W. S. FARRIS, Agricultural Economics
THE PRICE OF CORN during the
next several months will be governed by the amount of corn sold by
the Commodity Credit Corporation.
On April 1st, total corn stocks in
the United States amounted to approximately 2.3 billion bushels. Of
this amount slightly more than 1.1
billion bushels, or nearly half, will
probably be owned or controlled by
the Commodity Credit Corporation
by May 31. The probable disappearance of corn between now and October 1st is expected to be about 1.1
billion bushels. The minimum end-
of-year carry-over of "free" corn necessary to cover feed and commercial
operations is about 100 to 150 million bushels, making a total of 1.2
to 1.3 billion bushels needed for the
rest of the marketing year. This
amount is somewhat in excess of the
free corn currently available. Therefore, the price of corn is strictly
under the control of the Commodity
Credit Corporation.
Why Did Price of Corn Go Up?
As of April 1st, farmers had placed
116 million bushels of the 1955 crop
under loan and purchase agreement.
By May 31st, the final date for making corn loans, probably close to 500
million bushels will be sealed. This
rapid movement of corn to the loan
program has reduced the potential
supply of free corn, which in turn has
been an important factor in the recent rise in corn prices.
How Much Higher Will Corn
Prices Go?
the average loan rate for most of
Indiana is about $1.58. The cost of
Slivering   corn   to   the   Commodity
Credit Corporation is variable, but
ranges from about 7 to 12 cents.
Therefore, when the price of corn
on the farm approaches the $1.50
level, farmers are likely to redeem
corn from the loan program and sell
it to local feeders. In other words,
there is an effective ceiling on the
price of corn at about $1.50. In areas
where local corn is not available the
price can be somewhat higher.
price probably will move to near the
effective support level. If small
quantities are sold (50 million bushels or less), the price of corn will
probably stay around the $1.40 level
in corn surplus areas. But, if substantial quantities are released (100
million bushels or more), the price
could be pushed well below present
levels.
What will actually be done by
C.C.C. will no doubt be largely influenced by the developments of the
next several weeks. However, our
best guess at the present time is that
only enough corn will be released
to stabilize prices at near the present
level until mid-summer. After midsummer, corn prices will be influenced by prospects for the 1956 crop
as well as by C.C.C. action.
Corn Balance Sheet
What Can C.C.C. Do About Price
of Corn?
Of the 1.1 billion bushels of corn
controlled by the Commodity Credit
Corporation, about 400 million bushels are more than two years old. This
corn already is out of condition or
may soon go out of condition. Out-
of-condition corn can be sold at market price by the C.C.C. Therefore, the
policy regarding the sale of this corn
will have important effects on the
market. The amount that is actually
sold will pretty well govern the price
of corn.
If little or no corn is released, the
Million Bushels
Total  U.S.  Corn, April  1,   1956
Less Corn Controlled by C.C.C.
2291
- 1094
Approximate Total  "Free"
Corn
1197
Estimated Consumption  of Corn
by October 1
Plus Minimum  "Free" Carryover
1100
+    100 -    150
Total  Corn   Needed  by
October   1
1200 - 1250
Minimum   Needed  from  C.C.C.
0 -     50
1956 Barley, Oat Acreages Down
According to the March 1st estimate, the 1956 acreage of oats will
be reduced about 4 percent, while
barley acreage will be reduced approximately 8 percent. However,
large carry-overs in both these grains
will keep supplies plentiful and prices
low. The supplies of these and other
feed grains were taken into account
in estimating the price of corn.