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Corn and Soybean Demand: The Long View

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Apr. 10 2017, Updated 9:07 a.m. ET

Price drivers

So far, we’ve discussed corn and soybean front month prices, and as we know, prices stem from demand and supply. In the preceding part of this series, we briefly discussed the supply dynamics for corn and soybeans. Now it’s time to discuss the demand projections for these two crops.

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Long-term demand growth

In the chart above, we can see the trend of the USDA (US Department of Agriculture) data for historical demand for corn and soybeans, as well as Monsanto’s (MON) projections for demand in the future. Demand for corn over the past decade has grown at an average annual rate of 3.2%. Over the next decade, Monsanto projects this growth to slow down by 0.7%–2.5% annually.

Similarly, soybean demand in the past decade grew at 4.0% annually and is projected to grow at 3.7% annually over the next decade.

In its recent presentation, Monsanto stated that meeting this demand trend would likely require two-fold and four-fold increases in corn and soybean yield rates, respectively. Such increases would be supportive for fertilizer companies (MOO) like Potash Corporation of Saskatchewan (POT), CF Industries (CF), and Agrium (AGU).

Short-term fluctuations

But while the demand outlook for the long term is on an upward trajectory, short-term demand may experience volatility. Volatility, as we know, puts pressure on crop prices—which isn’t a positive sign for farm economics.

In the next few parts of this series, we’ll discuss demand projections for NPK (nitrogen, phosphorus, and potassium) fertilizers.

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