No Surprise: Expect Lower Corn and Soybean Prices for 2013-2014
Expect the corn and soybean price drops of the last few days to continue as we roll into the 2013 harvest.
“We have in place potential for a 14 billion bushel corn crop,” says Darrel Good, University of Illinois Extension Economist. Good told those attending last week’s Top Crop Farmer Workshop at Purdue University. That’s up considerably from 2012’s 10.8 billion bushel crop.
That’s bearish. “For the most part, that 14 billion bushels will be above (anticipated) consumption,” says Good.
Uncertainty remains. Good expects USDA’s June 28 plantings report of 96.4 million corn acres planted and 89.1 million harvested corn acres estimate to ratchet downward. Still, this may be offset by higher yields than USDA’s latest estimate of 156.5 bushels per acre.
“Based on what we know today, with crop and weather conditions, my (yield) expectations are higher than that, maybe 5 bushels higher than the USDA number at this point,” he says. “The critical period for determining yield is now beginning. This can change quickly, but as conditions stand today, we are basically looking at a trend yield for this year.”
Unless you locked in prices for this year last fall—and you likely have plenty of company if you didn’t—you’ve likely seen the last of $6 and $7 per bushel new crop corn for a while.
“I think we are transitioning back to a more sustainable long-term average price in that mid $4.50 level for corn,” says Good.
What About Soybeans?
More of a wild card exists with 2013 soybeans. USDA pegged soybean plantings at 76.1 million bushels, up 1% from last year. It estimated harvested acres at 75.3 million acres.
“As with corn, my expectation is these numbers may go down just a bit, particularly harvested acres,” says Good.
Like corn, yields are expected to be up from last year. USDA projects a full recovery to trendline yields of 44.5 bushels per acre yields, up from 2012’s 39.6 bushels per acre. USDA estimates total production to tally 3.42 billion bushels, up from last year’s 3.014 billion bushels.
Still, this won’t be known until later into the growing season.
“There is considerable more uncertainty about soybean yields compared to corn, due to the lateness of the crop, especially in northern growing areas,” says Good. “We need a full growing season. We can’t afford an early frost on this crop.”
If normal trend line yields result, though, it’s likely 2013-2014 prices will back off from last year’s $14 aveage range to between $10.75 to $11 per bushel, he notes.
Demand Will Bounce Back
Demand destruction is an unfortunate byproduct of a short crop. One positive of this year’s projected bumper crop is demand should snap back.
“We are looking at exports this year of 700 million bushels, a multi -decade low,” says Good. USDA is projecting a decent rebound in exports of 1.3 billion bushels. That is still below normal, but a decent rebound.”
Tempering this is that corn production is expanding worldwide into places like Brazil and the Ukraine. “Once production capacity is in place, it is hard to reverse,” says Good. “So, there will be competition in the corn export market as we move forward.”