So What's the Deal with Corn this Year?

The USDA's Statistics Service's most recent report on crop production had more bad news about the corn harvest:

Corn production is forecast at 10.8 billion bushels, down 13 percent from 2011 and the lowest production since 2006.

"Based on conditions as of August 1, yields are expected to average 123.4 bushels per acre, down 23.8 bushels from 2011.

"If realized, this will be the lowest average yield since 1995. [Editor's note: emphasis mine.] Area harvested for grain is forecast at 87.4 million acres, down 2 percent from the June forecast but up 4 percent from 2011.

Given what a huge part of our economy corn is, this isn't good news by any measure. Whether it's starch, livestock feed, ethanol production, or good ol' fashioned corn-on-the-cob, corn is vital.

What usually happens in a situation like this is:

1. demand is consistent, so...
2. prices go up, so...
3. more farmers plant corn to take advantage of the high price, so...
4. production levels stabilize, then...
5. production levels exceed original demand, so
6. prices fall again

The question is: what to do today. The answer depends on two things:

1. What are your needs as a manufacturer?
2. How much risk can you tolerate?

If your needs dictate that you need product now, you need product now. Period. If you can wait, how much are you willing to risk that production doesn't increase by the time you need product and/or prices not dropping?

The bottom line, as always, really is the bottom line.

And, remember, no matter what your corn starch (or other) needs are now or in the future, we can help.

By the way, here's a quick summary of the 2012 corn crop report at CNN Money.