By Alison Rice, AgWeb contributer
With growing conditions the best they've been in two decades, according to USDA's latest report, farmers and analysts are expecting bumper crops—and still softening prices—in the months ahead, especially for corn.
With 97% of the corn crop planted, the agency is currently projecting record production (13.935 billion bushels) and yields (165.3 bu. per acre) in 2014.
"If the weather forecast for the next two weeks is correct, we are looking at a record crop" of corn, Dan Basse, president of AgResource in Chicago, told AgWeb. "There have been years in which the average yield was 14% to 15% above trend, so we could see an average yield as high as 180 bu. per acre."
The news continues to put price pressure on corn, pushing it to $4.41 a bu. earlier this week, and some say prices could fall as low as $3.50 per bu.
But Jerry Gulke, president of The Gulke Group, says such scenarios are unnecessarily bearish, given the demand for corn. "You can’t assume that just because you get a good crop, you’ll have prices down near $4 again next fall, until you look at the improved demand," he said.
One source of increasing demand may be U.S. livestock farmers, who already use more than one-third of domestic corn production to feed their animals. Earlier this week, Agriculture Secretary Tom Vilsack announced that Hong Kong had lifted trade limitations on U.S. beef, raising the possibility of increasing beef exports.
"Hong Kong is already the fourth largest market for U.S. beef and beef product exports, with sales there reaching a historic high of $823 million in 2013," said Vilsack, who called the change "great news" for American beef producers. "We look forward to expanded opportunities there for the U.S. beef industry now that all trade restrictions are lifted."
Before Vilsack's announcement, the Hong Kong market had been off-limits in various ways since 2003 to American beef producers, due to concerns about a few cases of bovine spongiform encephalopathy (BSE).
The same strong growing conditions for corn have also benefited soybean crops. According to USDA, U.S. farmers will produce a record 3.635 billion bushels in 2014, with yields of 45.2 bu. per acre. The pricing outlook for soybeans, however, remains murky, with average prices expected to be between $9.75 and $11.75 per bu.
"The commodity that I’m most troubled by is the bean market," Farm Journal Economist Bob Utterback told the U.S. Farm Report Market Roundtable. "We’ve all gotten used to $15, $13. We’ve been bears. We sold $12 to $13, and it goes to $15. So we’ve been stung the last couple of years selling early. Everybody’s saying China is going to rescue us. What if they have a good crop? All of a sudden, I’ve got some people I trust in the trade who are saying that carryover is going to go 350 (million bushels), and if we go to 46 bu. (per acre) and find 2 million acres, you could go almost 480 million to 490 million bushel bean carryover. I don’t think anybody’s mentally ready for the number that clears at the bottom of the fall."
Meanwhile, prices for wheat are now moving upwards as analysts fret about the impact of recent rains in the Great Plains. "At this late date, rain does in fact do more damage to the crop than it is benefited," economist Dennis Gartman said. "Had these rains fallen two and three weeks ago, the crop might well have been greatly saved, but the fact that the rains have come now is almost sardonic."
(Rain hurts wheat crop quality when it falls on ripe grain, typically lowering the amount of flour that can be produced.)
But an uptick to $5.96 per bu. for September delivery is still far below the May high of $7.44 per bu. Then, prices were jumping due to global concerns about the political situation in Ukraine, which is one of the largest producers of wheat in the world, with 9.5 million metric tons expected to be exported this year, according to USDA. Many expected that this spring's conflict between Ukraine and Russia could affect its ability to export its grain, but so far that has not happened.
"From a producer's standpoint, it feels like without a major geopolitical twist of some sort, wheat is going to continue following corn prices in an effort to compete for feed demand," observed Kevin Van Trump of Farm Direction. "If the weather stays favorable and the U.S. corn crop pushes above 14.0 billion bushels (which looks to be the case right now) it will be tough for wheat to trade much higher, at least from a near-term perspective."