Aug 29, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin

USDA Economist: Sharp Drop in Commodity Prices Coming

February 21, 2013
By: Boyce Thompson, AgWeb.com Editorial Director google + 
Glauber USDA Forum
Agriculture Chief Economist Joseph Glauber presents remarks on the 2013 Agricultural Economic and Foreign Trade Outlook at the Opening session of the 2013 Agriculture Outlook Forum. (USDA photo)  

Commodity prices will fall "significantly" in 2013 due to strong corn and soybean production in 2013, USDA’s chief economist predicted today at the agency’s annual Agricultural Outlook Conference in Arlington, Va.

Joe Glauber predicted that corn prices will average $4.80 a bushel in 2013/14, down 33% from the marketing year before. Soybean prices, he estimated, would fall 27% to $10.50 per bushel. A return to normal weather conditions, he predicted, will result in higher production that will depress prices.

"There’s no reason to believe that we won’t be looking at normal yields this year," said Glauber, noting recent improvement in drought conditions, particularly in the eastern Corn Belt. "Historically, there’s little correlation between rainfall one year and the next."

Better weather, combined with more planted acres, should result in strong farm incomes in 2013, he said. Net farm income, according to ERS data released earlier this year, will equal $128 billion, the highest level in real terms since 1973.

Livestock producers, on the other hand, won’t feel the beneficial impact of lower feed prices until later in the year. Net cash income for the livestock industry, according to ERS’s forecast, will fall in 2013 due to a 6% increase in feedstock prices.

Glauber expects that farmers this year will plant at least as many acres for corn, soybeans, wheat as they did last year. But that will vary by crop. He expects corn planting to be down 0.7% while soybeans are up 0.4% and wheat is up 0.5%. "Combined acreage for those crops topped 230 million acres in 2012, and will likely approach similar levels for 2013," he said.

Corn and soybean production should be up as a result large plantings and better weather. USDA forecasts that corn production will be up 34.8% to 14.5 billion bushels and soybeans up 12.9% to 3.4 billion bushels.

The industry will be supported by record agricultural exports for 2013, according to USDA estimates. "The pace of exports this year has been impressive. In the first three months of the fiscal year, the U.S. exported $43 billion of agricultural products, greater than what we exported annually in the early 1990s," Glauber said.

Meanwhile, the United States, which used to command 70 to 80% of the world corn export market, is likely to relinquish its leadership position. This year, because of the drought, and strong yields in the Southern Hemisphere, the U.S. is likely to finish second to Brazil. "I expect this to be a very temporary situation," he said.

Increased production of corn and soybeans should rebuild historically low stocks. World corn stocks are at the lowest levels since 1993/94. Wheat stocks have dropped to 2008/09 levels.

Corn purchases by ethanol producers this year won’t return to 2011/12 levels. Glauber forecasts that 4.675 billion bushels of corn will go into ethanol, down from the 5 billion bushels bought in 2011/12. The economist explained that people are buying less gasoline due to economic problems and the increased fuel efficiency of cars.

Lower feed prices later in the year may stem the loss of cattle. Glauber noted that the country lost 3.4 million head in Kansas, Oklahoma and Texas in the last two years. During the summer, 60% of pastures suffered drought conditions. Without more rain, he said, "unfortunately we could see further liquidation."

Higher feed prices will lead record prices for livestock, dairy and poultry this year. Overall food prices, though, won’t increase as much. ERS forecasts that the food portion of the Consumer Price Index will rise by only 3 to 4% in 2013, below food inflation levels of 2008 and 2011.

The big variable in Glauber’s forecast is the weather. While the percentage of the country in drought condition has declined 5.4% since January, 56% of the land mass remains in drought conditions. "A key uncertainty is whether the historic drought of 2012 persists through 2013," he concluded


 

See Comments


 
Log In or Sign Up to comment

COMMENTS (6 Comments)

DeWight Pritchett - Sunnyside, WA
Her in eastern Washington State new circles are going up almost every day, as we cannot farm without irrigation. The dairies are the ones doing this because of feed costs and having to get rid of manure. Because of this, Washington is the only state to INCREASE the number of dairies and cows. What are the only two words Dutchmen know? More Cows
7:52 AM Mar 5th
 
CARROLL - JASPER, NY
It is necessary that all grain farmers would plant about 10% less corn and soy beans this season . In order to keep relative prosperity in rural communities and to enhance the overall economic growth in the US . If grain prices fall sharply , we will have further erosion of milk prices as dairymen can not resist feeding more grain, even knoeing that would destroy their own prices . I would guess that the cost of producing a bushel of would be in the $5 to %.25 range this past year . How many of you can stand to recieve below your cost and for how long ? Think hard before you plant . There are other small grains that would take less inputs and do better in drought areas .
11:37 AM Feb 22nd
 
Minnesota Farmer - Brownsdale, MN
What a goof, I had 200 bushel corn in 2012 after the dry weather from July 2011 through 2012. I wouldn't bet on half of that this year with our moisture situation and we are in the improved area on the drought monitor. Did this guy let us know what was going to happen last year when we had way more moisture to draw from. It would have to rain so much we couldn't get it planted to start to end the dryness.​
11:24 AM Feb 22nd
 
FG - cuba, IL
Who knows what the weather wil bring. No one does.

Of course, the major agribusiness interests like to talk prices down- and they are successful.

They many be right as any idiot could tell you they will fall if we have a large crop. Bu the gola of these groups is to keep the prices down at all times as much as possible.

Nothing new! And the AFB never tries to correct such premature misinformation.

5:22 PM Feb 21st
 
FG - cuba, IL
Who knows what the weather wil bring. No one does.

Of course, the major agribusiness interests like to talk prices down- and they are successful.

They many be right as any idiot could tell you they will fall if we have a large crop. Bu the gola of these groups is to keep the prices down at all times as much as possible.

Nothing new! And the AFB never tries to correct such premature misinformation.

5:22 PM Feb 21st
 
farmer al - Annandale, MN
Just what we need another person saying the drought is over. Come to central MN , and I quarantee the drought is far from over. Just a way for the gov to keep the prices low for insurance purposes.
1:26 PM Feb 21st
 



Name:

Comments:

Receive the latest news, information and commentary customized for you. Sign up to receive Beef Today's Cattle Drive today!. Interested in the latest prices for cattle in your area? See highlights of the latest for-sale cattle in the Cattle-Exchange eNewsletter.

 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions