Corn prices have the potential to break all-time record highs on the heels of USDA's June World Agricultural Supply and Demand Estimates which indicate significantly lower U.S. production and ending stocks.

“We're already in the $7 area for corn,” said Mike Krueger, a market analyst from The Money Farm, speaking at the Minneapolis Grain Exchange June conference call. “We could go to $7.50 pretty easily because of the makeup of the market.

“It's going to be difficult to find sellers at those kinds of numbers. But if we get later into the summer and anything threatens corn's 148-bushel average yield, and you take corn supplies down quickly, my feeling is that corn has the potential to do this year what wheat did last year. I don't mean going to $15 or $20 a bushel, but to set all-time highs by substantial margins.”

While USDA left acreage estimates for corn unchanged from the previous month at 86 million acres, Krueger said acres could be lower due to wet weather in some parts of the Midwest forcing planting into other crops. “I wouldn't be surprised if in the June planted acreage report, we would see 1 million to 1.5 million fewer acres of corn. If you took a million acres off at 148 bushels per acre, you drop ending stocks 148 million bushels.”

Krueger says the gap between corn and wheat prices could get slimmer with bearish news on wheat, including higher U.S. and world production. “I don't think it goes to even money, but I do think the feed grains market will support wheat.”

Krueger noted that $15 to $16 a bushel for soybeans is not out of the question, either, as old crop ending stocks have dropped precipitously to 125 million bushels. “We're close to $15 now and I certainly don't rule out that we can go to $16 depending on what the weather does over the next six to eight weeks.

“Really, when you look at both the corn and soybean markets and where stocks numbers are projected for the end of the next marketing year, it looks to me like both crops are going to need to increase acres significantly in the spring of 2009. We've had two years where we've talked about this battle for acreage. It looks to me like it's going to be just as hot a topic as we go into 2009.”

Krueger believes USDA's billion-bushel reduction from last year for corn feed and residual use is too high, “because I think USDA is a little too pessimistic on animal numbers. That's an unprecedented cut in feed and residual for corn. It looked to be the easiest place to keep the corn balance sheet in some semblance of order with the lower production estimate.”

Krueger says there are two big threats to agricultural prices. “One is we have an economic meltdown in Asia, because that's where the big demand growth has been. Second, our own government does something to artificially kill the market. That means either backing off its stance on biofuels or opening the door for cheap imports of Brazilian ethanol.”