Lower Corn Prices Ahead For Iowa Farmers?

Lower Corn Prices Ahead For Iowa Farmers?

ISU ag economist Chad Hart analyzes USDA's latest corn, soybean supply-demand projections for 2012-13 marketing year.

USDA has lowered the projected high end on the season-average farm price for corn for the 2012-13 marketing year to the $6.75 to $7.45 per bushel range -- a 20 cent per bushel drop from last month's projection. "That's a trend we hope doesn't continue as we get closer to planting time," observes Marshall County, Iowa farmer Jim Barker.

The new USDA price projection came in USDA's latest monthly "World Agricultural Supply and Demand Estimates" report, released March 8.

CROP PRICE PROSPECTS: March USDA supply/demand report projects the same ending stock levels for corn as February report, but there are some adjustments. U.S. corn imports were raised by 25 million bushels, exports lowered by 75 million bushels and feed demand was raised. U.S. soybean exports remain strong despite tight stocks and global competition. USDA moved the midpoint of its projected season-average price range down to $7.10 per bushel for corn; midpoint of season-average price range for soybeans stays at $14.30 per bushel.

USDA is projecting tight season-ending stocks of 632 million bushels of corn on hand in the U.S. for August 31, 2013. USDA lowered its corn export estimate by 75 million bushels, based on the low pace of export sales and shipments to date and stronger expected competition from South American corn and competitively priced feed quality wheat. If USDA's projection for corn exports for the current marketing year is achieved, it would be the lowest level of corn exports since 782 million bushels in 1971-72.

However, USDA raised its projection for feed and residual disappearance for corn by 100 million bushels as a result of continued expansion in poultry production. "We're seeing a shift in corn demand," says Chad Hart, Iowa State University Extension grain marketing specialist. "We've lowered the export projection, but raised feed demand." The poultry industry is expected to see a rebound as it goes forward in the 2013 marketing year. The sizable increase in broiler production will use more corn.

Two Corn Belts in 2013 -- eastern Corn Belt with adequate moisture and western Corn Belt with low subsoil moisture reserves

The eastern Corn Belt is entering spring with adequate moisture, the western Corn Belt remains in a drought situation. Crop prices will depend on whether or not dry areas get timely rains. "It's a tale of two Corn Belts," says Hart. "The eastern Corn Belt is looking at trendline yields. But the western Corn Belt is still looking at below trendline yields."~~~PAGE_BREAK_HERE~~~

As the deadline nears for signup for federal crop insurance on March 15, Hart says the $5.65 revenue protection price sets a good floor for 2013 corn production. That's a pretty decent margin that's going to be protected, as production costs are likely in the $4.50 range for many farmers. Beyond that, a grower should look at what the market is offering compared to his expected cost of production. New crop corn is currently $5 to $5.20 a bushel in Iowa. That's a $2 discount to the cash corn price offered today. But $5 to $5.20 still looks profitable, with a $4.50 cost of production, notes Hart.

U.S. soybean exports remain strong despite tight stocks, global competition

USDA's World Agriculture Supply and Demand Estimates, or WASDE, report released March 8 predicts the nation's soybean reserves will remain at their lowest levels in half a decade. This latest monthly report estimates that soybean stocks in the U.S. at the end of the 2012-13 marketing year on August 31 will be only 125 million bushels. That estimate is unchanged from the February WASDE report.

Although soybean export commitments through February exceeded last year's pace, the March report says U.S. exports are expected to decline in the months ahead as increased competition from a record South American crop limits additional sales during the second half of the 2012-2013 marketing year.

The March 8 WASDE report projects the U.S. season-average soybean price for the 2012-13 marketing year will range from $13.80 to $14.80 per bushel. The projected price narrowed 25 cents on each end from last month. According to the report, the U.S. soybean crush is ahead of last year's pace, but it projected to slow in the second half of the marketing year.

Market's concern for adequate world grain and oilseed supply may provide some short-term pricing opportunities for farmers

Iowa Soybean Association president Mark Jackson of Rose Hill says even though stocks remain unchanged, the market's reaction shows ongoing concern for adequate world grain and oilseed stocks. There may be short-term marketing opportunities for the state's farmers. Farmers need to keep a close watch on market developments and be ready to take advantage of those pricing opportunities when they occur, because they may not last too long depending a lot on the weather this spring and summer.~~~PAGE_BREAK_HERE~~~

"Our world trading partners are cautiously watching the commodity market prices, which are rationing usage to bridge those gaps between crops while maintaining adequate grain stocks," Jackson says. "ISA has ongoing travels to maintain a positive dialogue to reassure customers that a consistent, adequate and quality supply of soybeans and related products will be available. Our upcoming trip to China, the largest customer for U.S. soybeans, is one example of those efforts."

ISA farmer leaders and staff members will travel to China March 15 to 24

"China continues to buy commodities from the United States, even as recently as this past week," says Grant Kimberley, ISA's director of market development. "We are working to be as proactive as possible as we are exploring new and growing markets in China."  The group will visit aquaculture facilities while in China. That industry, fish farming, is one of the country's fastest growing segments using soybean meal for feed. "Building strategic partnerships now will benefit us all down the road," adds Kimberley.

The group will visit China as the country welcomes its new president Xi Jinping. Xi first traveled to Iowa in 1985 as part of a Chinese delegation studying American agriculture and returned last year. The Iowa Soybean Association has maintained its relationships with Xi and Chinese industry partners.

"While we won't be meeting with Xi on our trip to China this time, we are looking forward to celebrating his new position," says Kimberley. Xi visited the Kimberley farm in central Iowa last year. "Iowa farmers have a unique connection with Xi and China and we're excited to strengthen our partnerships to benefit both countries."

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