After several years of $5-7 corn prices, and a nudge of the $8 mark, USDA’s forecast of a $4.80 average for the 2013/14 marketing year was a 2 by 4 wake-up call about what could happen in a return to normal yields with large acreage.
$4.80 average farmgate prices will put many operating budgets in the red, particularly if they include higher levels of cash rent. Let’s take a deeper look at the numbers below the headline from USDA’s Outlook Forum.
The initial forecast for a $4.80 average cash price for corn in the 2013/14 marketing year came from the presentation of USDA’s Chief Economist Joe Glauber.
In his remarks at the outset of the Outlook Forum, Glauber said, “Farm prices for most grain and oilseeds will be lower, reflecting larger domestic and world supplies. A return to trend yields will likely push corn prices down significantly as stock levels rebuild. Corn prices are forecast to average $4.80 per bushel in 2013/14, down 33 percent from 2012/13’s record levels and, if realized, the lowest average price since the 2009/10 marketing year.” Regarding soybeans, he went on to say, “Likewise, larger supplies and increased carryout will weaken soybean prices to $10.50 per bushel, down 27 percent.”
Following Glauber’s presentation Thursday, USDA’s Economic Research Service (ERS) released its detailed projections for the supply and demand of the 20113 corn crop that will impact every Cornbelt marketing plan.
The ERS analysis indicates, “Corn plantings are projected down slightly on the year, but production is expected to be record high with more acres harvested for grain and a rebound in yields. Feed and residual use rises sharply with the larger crop. Weak gasoline consumption limits the recovery in corn used to produce ethanol and strong foreign competition tempers the rebound in exports. Corn ending stocks are projected to more than triple, pushing prices sharply lower. Soybean planted area is projected slightly higher than last year with favorable net returns, increased double cropping, and reduced cotton plantings. Soybean supplies are projected to increase as higher production more than offsets lower beginning stocks and imports. Soybean ending stocks are projected to rise from the exceptionally low level projected for 2012/13 as competition from South America limits potential export gains.”
Here are the details:
- Corn plantings for 2013 are projected at 96.5 million acres, down 0.7 million acres from last year’s 75-year high.
- Strong new-crop prices in both the futures and cash forward markets support a highly favorable net returns outlook, much as it did last year at this time. New-crop futures during the first half of February averaged $5.70 per bushel and bids for fall delivery at Central Illinois elevators during the same period averaged $5.45 per bushel.
- A return to more normal spring weather is expected to reduce this year’s planting opportunities for corn and leave more land available for soybeans.
- Soybean planted area is projected at 77.5 million acres, up 0.3 million from 2012 and up 3.6 million from last year’s planting intentions. New-crop soybean futures prices and current forward pricing opportunities are somewhat higher than last year at this time both in level and relative to corn.
- Favorable soybean prices combined with higher winter wheat seedings in traditional doublecrop states compared with 2012 will increase the potential for double cropping, especially in the SRW wheat areas of the eastern Corn Belt and the Delta states.