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Commodity Price Slump Is Ending, USDA says

Gradual increases seen ahead.

WASHINGTON, D.C.--When U.S. farmers bring their crops to market this year, they will see "the beginning of gradual price increases that are expected to continue through the decade," ending the slump that began in 2013, said USDA projections.

Prices for most crops will remain below their 10-year average, however, and to maximize returns, farmers will plant more soybeans, making it the No. 1 crop, while planting less corn and wheat.

"These projections are the first in history where soybean acreage is expected to eclipse corn acreage," said USDA in its 10-year projections of U.S. and world agriculture. USDA released a slimmed-down version of the baseline last November, which also projected soybeans to consistently outrun corn as the most widely planted U.S. crop through  2027. The projections were based on weather and market conditions last fall and will be updated at USDA's Ag Outlook Forum next Thursday and Friday.

In 2018, farmers are expected to plant equal amonts of corn and soybeans this year, 91 million acres each, USDA says.

The end of "king corn" would profoundly change the traditional lineup of the four major U.S. field crops – corn, soybeans, wheat, and cotton, which covered 239 million acres last year, an area more than twice as big as California. 

"Sustained increases in yields keep total production increasing, even for corn, which is expected to lose the most acres over the next decade," said USDA, referring to the eight leading U.S. crops, corn, soybeans, wheat, cotton, rice, sorghum, barley, and oats. Soybean plantings are expected to run in the range of 91 to 92 million acres a year through 2027, while corn drfits down to 87.5 million acres. 

"Food and feed grains prices are expected to have bottomed out by marketing year 2017/2018," said USDA, referring to the current year. "Marketing year 2018/2019 marks the beginning of gradual price increases that are expected to continue through the decade." Corn prices are projected to rise by 30¢ a bushel through 2027, soybeans by 40¢, and wheat by 60¢. With the recovery, corn prices would be half of the record $6.89 a bushel paid for the 2012 crop at the peak of the commodity boom; wheat and soybean prices in 2027 would be two thirds of their 2012 records.

"Prices for most crops remain below their 10-year averages," said the USDA in describing the economic assumptions that shaped its projections. "Prices are expected to be lowest in the beginning of the projection period and thereafter rise moderately, reflecting long-term growth in global demand for agricultural products and continued biofuel feedstock demand." 

The strong dollar will dampen the growth in U.S. export volume, but the U.S. will remain competitive in the world market, said the USDA. "While exports are projected to rise, contributing to long-term increases in cash receipts for U.S. farmers, the U.S. is still expected to lose global market share due to increased global production."

The only time that soybean plantings have exceeded corn was in 1983, when the Reagan administration's Payment In Kind (PIK) program reduced corn acreage by 30%, to 60.2 million acres vs. 63.8 million acres of soybeans. PIK was created in reaction to a record-large 1982 corn crop and surpluses of other crops. Under PIK, the government gave surplus commodities to corn, wheat, and cotton growers who idled cropland beyond the amount required when they signed up for crop subsidies. 

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