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The $4-Corn Train Gains Speed

February 23, 2013
By: Sara Schafer, Farm Journal Media Business and Crops Editor
money train
  

It may be time to bid farewell to $6 and $7 corn. USDA’s estimates are showing support for much lower prices.

An average corn price near $4 is a great contrast to recent prices of $6 and $7. But, that’s what seems to be in the cards.

During its annual Agricultural Outlook Forum this week, USDA released estimates showing a dramatic drop in corn and soybean prices.

Here are the agency’s crop price predictions for 2013/14:

  • Corn: $4.80 (-33.3% drop from 2012/13)
  • Soybeans: $10.50 (-26.6% drop from 2012/13)
  • Wheat: $7.00 (-11/4$ drop from 2012/13)
  • Cotton: $15.20 (+2.0% increase from 2012/13)

 

Jerry Gulke, president of the Gulke Group, reminds producers that to have an average price of $4.80 this year, prices could drop even lower.

"We’ve been talking $4 for quite a while now," he says. Based on Friday’s market close, he believes the markets are starting to believe these price predictions.

A key reason prices will drop is the possible return to normal production. Joe Glauber, USDA Chief Economist, says the outlook for 2013 calls for a rebound in crop yields. "This will result in record production levels for corn and soybeans, and by autumn 2013, lower prices for most grains and oilseeds."

Here are USDA’s forecasts for 2013 acreage mix:

  • Corn: 96.5 million acres (-0.7% from 2012)
  • Soybeans: 77.5 million acres (+0.4 from 2012)
  • Wheat: 56.0 million acres (+0.5% from 2012)
  • Cotton: 9.8 million acres (-19.0% from 2012)
     

"High grain and oilseed prices support another year of large plantings for wheat, corn and soybeans. Combined acreage for those crops topped 230 million acres in 2012, the highest since 1982, and will likely approach similar levels for 2013," Glauber says.

Gulke believes more corn acres will be planted, than USDA is estimating.

Regardless, he says, average yields this year are not needed. "This is different from the last two years, in that we’ve cut demand. We’re setting here, with demand being curbed, and incentivizing the entire world to plant corn and soybeans."

Gulke says that farmers should be aware of the information released by USDA this week, but also realize these numbers will likely be changed with the March 28 Prospective Plantings reports.

Hear Gulke's full audio analysis:

Read more AgWeb.com coverage of USDA's Agricultural Outlook Forum:

 

U.S. Cattle Herd Continues to Contract
Record-high feed prices will stick around most of this year, which will continue to put the squeeze on an already suffering livestock industry.

Low Prices Hit Farm Belt: Growers Get More Crop, Less Cash
Prices for corn and soybeans will fall this year on record production, easing food inflation while providing less cash for growers recovering from drought.

CME Concerned Over Sequestration Impact on Livestock Futures
The cuts could impact the physical delivery and cash settlement mechanisms of certain CME livestock and dairy products.

Sequestration Imperils Agriculture Programs, Vilsack Warns
The U.S. agriculture secretary delivered that message Thursday at his department’s Agricultural Outlook Forum 2013.

USDA Economist: Sharp Drop in Commodity Prices Coming
Commodity prices will fall "significantly" in 2013 due to strong corn and soybean production in 2013, but the weather remains a wild card.

 


 

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COMMENTS (1 Comments)

verbatime
Oh, sure I've seen the subsoil moisture regenerate over night out of thin air before... I see no reason why folks couldn't raise trend line yields. lol
7:47 AM Feb 23rd
 



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