News Column

Slumping markets producing some anxiety for corn, soybean growers

August 31, 2014

By Jim Offner, Waterloo-Cedar Falls Courier, Iowa



Aug. 31--These have to be nervous times for farmers whose corn and soybean crops are hurtling toward the harvest.

With new-crop corn prices hovering at or below $3.25 per bushel and soybeans struggling to reach $10 last week, growers have to be wondering what to expect next.

These are not the good old days of $7 corn and $13 beans.

And, with experts predicting record corn harvests across the U.S. and at least better-than-average in Iowa, the good times don't appear set to return anytime soon.

In some cases, growers might be hoping simply to get back what they put into the crop.

That prospect might even be questionable, at least at this point, said Chad Hart, an economist with Iowa State University Extension and Outreach.

"I would argue in a lot of cases we are below production costs," Hart said during a recent conversation. "When you look at local cash prices, farmers are staring at prices they haven't seen in five years."

Demand growth for crops has slowed, he said when asked about the reasons behind the drooping markets.

Of course, an anticipated big crop has something to do with it, too, Hart said.

"The biggest thing is the sheer size of this year's crop nationwide," he said. "Here, it looks good, but when you look at the rest of the country, we're looking at record-setting crops. Then you tend to get low prices, and that's definitely what farmers are seeing."

Corn was over the $5 mark as late as May but had sunk below $4 by late July. The downward trend hasn't slowed much.

"Last time we really had this was 2009," Hart said.

Of course, that was during the depths of the most recent recession, Hart said, and he noted that the grain markets bounced back within about six months.

Don't expect that to happen this time, because of the size of the anticipated crop and weaker demand growth rates.

"In 2009, ethanol demand was higher, and there were more feed animals on the farm," he said.

Perhaps laws of economics will kick in to provide a boost to prices, Hart said, noting that a depressed market likely will curb plantings for next year. The result might be lower supplies and, in turn, higher prices, Hart said.

"South America likely will plant a little less because prices aren't as attractive," Hart said.

It's possible that some farmers in the U.S. and in Iowa might look for alternatives to corn and soybeans, too, Hart said.

"Corn and soybeans have gained in the Grain Belt, so, typically, the first crop that comes to mind (as an alternative) there is wheat," Hart said. "That could that pull some across the region."

Barley, sorghum and oats could see some gains, too, he said.

"You could have a few farmers get some land back in hay or pasture -- sort of a reverse over the last five years, where we were trying to bring as much land a possible into corn and beans," he said.

Much of what happens in the soybean market may hinge on China, which takes as much as 60 percent of U.S. soybean exports and one-quarter of total U.S. production, Hart said.

"They are a massive market and continue to be and continue to grow," he said. "They continue to be a positive impact."

That's one reason old-crop soybeans were still around the $10 level.

By contrast, China is a relatively small player in the U.S. corn market, buying, perhaps 6 percent of U.S. corn exports, Hart said.

"Corn is where we've had fits and starts with China," he said.

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(c)2014 Waterloo-Cedar Falls Courier (Waterloo, Iowa)

Visit Waterloo-Cedar Falls Courier (Waterloo, Iowa) at www.wcfcourier.com

Distributed by MCT Information Services


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Source: Waterloo-Cedar Falls Courier (IA)


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