Corn prices average $4.65 per bushel for the 2013/14 marketing year, according to the new baseline report by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri.
"Once stocks rebuild, prices could be even lower in subsequent years," FAPRI reports. FAPRI uses acreage, yield and production estimates from USDA’s August Crop Production report and macroeconomic assumptions from ICH Global Insight.
FAPRI forecasts soybean prices to average $11.33 per bushel for this year’s crop, with further declines possible in 2014. For all crops, prices will be sensitive to changing production estimates, the economists say. Wheat prices are expected to decline from $7.11 per bushel this crop year to $5.90 in the 2014/15 marketing year and then increase gradually to $6.28 by 2018.
FAPRI looks for lower prices to result in fewer corn acres in 2014, with this year being the peak for the entire period. By 2018, corn acreage will be 4 million less than this year, 93.1 million, according to the report. Corn yields are anticipated to increase from 154.4 bu. per acre to 171.6 bu. per acre between now and 2018. A more modest increase in soybean yields are expected, shifting from 42.6 bu. per acre to 46 bu. per acre.
The area devoted to soybeans, wheat, cotton and rice may increase slightly, while the area planted to 13 major crops is projected to decline by about 1%. The forecast calls for ethanol production to increase in 2014, although the size of the increase will be sensitive to Environmental Protection Agency’s decision about how to implement the renewable fuel standard.
Lower feed prices will reduce livestock and poultry production expenses, resulting in greater profitability and setting the stage for increases in meat production. However, in the case of the cattle sector, reduced livestock herds mean beef production will reach a low in 2014, FAPRI says.
The institute sees growth in both the U.S. and global economies. U.S. gross domestic product (GDP) is forecast to increase from 1.6% in 2013 to 2.7% next year, and 3.5% in 2015 before moderating somewhat, to a range between 2.7% and 3.1% in subsequent years. World GDP is forecast to increase from 2.4% this year to 3.4% in 2014 and then be 4% in 2015 and 2016. After that, it’s expected to decline slightly to 3.8% by 2018. China’s GDP growth is expected to be 7.5% this year, rising to a peak of 8.2% by 2015, before gradually declining to 7.1% by 2018.
FAPRI expects interest rates to increase during much of the forecast period, with the 3.3% prime rate forecast for 2013/14 increasing just slightly to 3.4% in 2015, but steadily rising to 7% by 2018.