As the harvest approaches, Dr. Bill Tierney has some serious reservations about the economic future of this year’s record crops.
"I am concerned that demand will be mediocre for a corn crop of this size," said Tierney, chief economist at AgResource Company, during a CME Group webcast Wednesday with Kyle Schrad, a risk management consultant with International FC Stone. Compared to other countries, "U.S. corn is not the cheapest corn around right now," Tierney added. "People are going to look the demand and [wonder] where we are going to put all this corn, and it’s not a pretty picture."
Tierney is equally worried about soybeans and the potential influence of South American harvests on the prices for U.S. farmers. "The larger crop—the one that is more important to the world market—has not even been planted yet," Tierney said. "The U.S. crop is very important, but much of the story of the U.S. crop is already over."
Like others, he will be watching for today’s USDA reports on world production. Based on a 46.5 bu. per acre yield for soybeans, the projected low is $9 per bushel, according to AgResource’s price models. But if the forecast gets pushed up to 47 or 48 bu. per acre, prices will be under pressure. "You’ll be pushing that low down to the $8 range," said Tierney.
He said that figure could go even lower in 2015. "I think, given the huge size of the global carryover means that next year, it’s quite possible that you could see November soybeans trading around the $7.50 level come harvest."