Pray for Rain? Think Again

March 24, 2013 10:38 PM
Pray for Rain? Think Again

Favorable weather this growing season could shave $2 per bushel off the price of corn as bins, silos, and ag bags are filled to the max with a record-large corn crop. That’s the conclusion of a recent report by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri.

Pat Westhoff, FAPRI director, says the analysis shows that new-crop corn prices will average near $5 per bushel, down from $7 for the crop harvested last fall. FAPRI’s projected corn price, however, assumes corn is planted on 96.9 million acres, which would be the second highest to 2012’s record, and a return to trend yields of 162 bushels per acre.

Last year, the average yield was only 123 bushels due to large areas of drought, and 2012 was the third year in a row that the average corn yield fell below trend, Westhoff notes. A record corn crop would allow stocks to build, sending prices sharply lower.

The FAPRI report, U.S. Baseline Briefing Book Projections for Agricultural and Biofuel Markets, was released earlier this month.

FAPRI also conducted a stochastic analysis in which computers come up with 500 potential outcomes that showed annual corn prices were below $3.50 per bushel 10 percent of the time and above $6 per bushel 10 percent of the time over the 10-year forecast period beginning in 2013. But Westhoff notes that actual volatility could be even greater.

Beginning in 2014 and continuing through 2022, average grain and oilseed prices are projected to remain well below the record levels of 2012-13, the report notes. However, they are also expected to be well above the average prices prior to 2007. Corn prices, for instance, during the forecast period average just under $5 per bushel.

Ethanol production in 2013-14 is projected to rebound significantly assuming that the biofuel mandates are enforced. "The value of the certificates used to demonstrate mandate compliance must rise substantially to cover the discount needed to sell fuels containing more than 10 percent ethanol," says the report. Ethanol production for the 2013-14 crop year grows a sharp 16 percent to 14.4 billion gallons. By the end of the forecast period, however, ethanol production is expected to hit only 15.7 billion gallons, slightly more than a 1 percent annual growth rate.

Farm income in 2013 is expected to continue strong for the third back-to-back year. "Net farm income, a measure that includes changes in the values of inventories, reaches a record $131 billion in 2013, while net cash income reached its record level in 2012. Both net income measures retreat slightly in 2014 in response to lower crop prices and receipts," the report notes.


Check Your Weather Forecast

What’s in store for your area? AgWeb offers these weather forecasting tools:

Pinpoint Weather: A suite of information that lets you view weather conditions, forecasts and rainfall down to the field level. Among the more exciting features of Pinpoint Weather is its ability to track storm movements and speed. By rolling your cursor over the storm icon on the map, you can see where a storm is heading and what time it will arrive.

Daily Temperature Ranges: The daily high and low temperatures for your region.

Observed Rainfall: Precipitation levels within the last six hours.

Crop Moisture Levels: An index that tells you how much moisture is in the ground.

Long-Range Temperature Outlook: Will it be hotter or colder than normal during the next week, month, or three months? These charts show the future.

Severe Weather Forecast: Can you expect any weather hazards today? This chart outlines possibilities for floods, blizzards, and other dangerous conditions.

Palmer Drought Index: An index that measures drought conditions throughout the country.

Cumulative Rainfall: Check to see how much rain has fallen in your region within the last day, week, or even three months.


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Spell Check

3/25/2013 03:51 AM

  $2 off of the price of NEW crop corn? You do realize that the price of NEW crop corn (December) is nowhere near $7 right? It's currently at $5.65 per/bu, less a $0.25 under basis, puts the price of NEW crop corn at $5.40 per/bu. That's pretty close to the forecast of $5.00. Not to mention the fact that the big acreage forecast is already in the market, as well as the mentality of "don't worry, it will rain." I do realize that it is not even April yet, but we are not starting off this season on the right foot out west. 162 bu/acre national average is a pipe dream for 2013.

3/26/2013 06:58 AM

  Even if it does rain across the corn belt and corn averages $5.00, the higher yields would make up for any price reduction and incomes will not suffer. There could be isolated areas of low yields that would be an exception. Experts are not always right so the prudent farmer will take that into consideration and protect himself from adversity. When it comes right down to it the farmer is his own expert. All others work for someone else who wants and needs the farmer's business and money and advise the farmer accordingly to that end. Yes, it will rain again but no one can predict that for certain in the long term or when and where.

4/11/2013 03:56 PM

  Just keep doing surveys and hopefully we can get corn prices down to $2. It will be fun to watch the big shots go broke and deal with the mess they created (high production costs-rents)


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