The export demand story for corn and soybeans is a relatively buoyant one from now to 2023. But even so, producer prices are likely to hover near breakeven, according to the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri.
In its new econometric baseline, FAPRI economists predict farm corn prices of $4.42/bu. this year, $4.17 in 2014/15, with an average of $4/bu. for 2015/16 through 2023/24. The last four years of the period, corn prices are forecast to be slightly below $4.
These corn prices would represent more than a $1/bu. drop from the $5.18 average of 2008/09 to 2012/13. Planted corn acres decline from 95.4 million in 2013/14 to 91.3 million this year and average 90.7 million acres for the rest of the decade. FAPRI quickly adds, however, that even with a $4 average, weather, energy prices and other factors could lead to prices over $5/bu. or below $3/bu.
For soybeans, FAPRI looks for a larger price decline, from $12.57 this year to $9.84 for 2014/15 and average $9.82/bu. from 2015/16 to 2022/23. Soybeans prices averaged $11.55 from 2008/09 to 2012/13. Soybean acreage is expected to increase from 76.5 million acres in 2013/14 to 78.7 million acres in 2014/15, but drop back to average 76.6 million acres from 2015/16 to 2023/24.
FAPRI economists see a downward correction, too, in wheat prices, from $6.82 in 2013/14 to $5.55 in 2014/15, with farm prices to average $5.27/bu. from 2015/16 to 2023/24. For 2008/09, wheat prices averaged $6.47/bu. Little change is expected in wheat acreage.
FAPRI sees a steady increase in corn yields from 158.8 bu./acre in 2013/14 to 181.2 by 2023/24. Because of that, total production sets a new record each year, from 14.8 billion bushels in 2013/14 to 17.1 billion by 2023/24. Ending stock levels continue to increase over the period, from 1.665 billion to 2.238 billion bushels—increasing each year, as supply increases faster than demand.
Exports, however, set a new record, from 1.447 to 2.883 billion bushels. Corn used for ethanol hovers around 5 billion for the period, while feed and residual use increases slightly from 5.264 billion bushels to 5.395 billion. However, FAPRI forecasts that this category will see less corn use than 2013/14 until the 2018/19 marketing year. On the cost side, variable expenses decline from $354.48/acre in 2013/14 to $338.29 in the upcoming marketing year and bottom out for the decade at $333.37/acre for 2015/16, mostly due to declines in fertilizer prices. Costs after that climb and reach $374.88 by 2023/24.
Only a modest yield increase is forecast for soybeans, from 43.3 to 48.6 bu./acre over the decade. Strong soybean exports continue, but at a slower rate that in recent years, increasing from 1.5 billion in the current marketing year to 1.6 billion by 2023/24. However, while a small increase is expected in soybean exports for 2014/15, for 2015/16, FAPRI looks for a decline to 1.495 billion bushels. Soybean crush increases from 1.669 to 1.952 billion bushels over the forecast period. Biomass-based biofuel demand is forecast at 1.4 billion to 1.5 billion gallons.
Despite strong demand, U.S. soybean stocks increase from 144 million bushels in 2013/14 to 248 million bushels by 2023/24. Variable costs increase from $154/acre to $175 over the period. While for 2014, returns appear to favor soybeans according to most analysts, soybean net returns per acre are lower than for corn over the next decade, FAPRI’s analysis shows.
For U.S. wheat, planted area is constant over the forecast period, although a slight increase is expected this year. Exports increased in 2013/14, but could be under pressure in 2014/15 from competing international supplies of wheat and low corn prices. Domestic feed use of wheat also declines. Exports are stable over the decade at about 1.1 billion bushels, with ending stocks increasing from 611 million to 734 million bushels. Yield changes little over the period, from 47.2 bu./acre in 2013/14 to 48.7 by 2023/24.
Looking at key variables, FAPRI assumes U.S. GDP growth of 3% during the next five years, a slow decline in the unemployment rate, low inflation and short-term interest rates increasing in 2016 and reaching pre-recession levels in 2017. Global GDP is forecast to improve from 2.5% in 2013 to 3.3% this year, peaking at 3.9% in 2016/17 and be 3.6% by 2023.
China’s GDP is forecast to increase from 7.7% last year to 8.1% in 2014 before peaking in 2015 at 8.3%. For the rest of the decade, however, China’s GDP growth rate declines, hitting 6.2% by 2023. The world population growth rate also declines, from 1.1% growth in 2013 to 0.9% growth in 2023.