FOCUS ON AGRICULTURE: FAPRI report looks for drop in corn prices

Posted: Mar. 20, 2013 12:32 pm Updated: Apr. 19, 2013 1:15 pm


If average weather returns, look for a record 2013 corn crop -- and for corn prices to drop $2 per bushel.

University of Missouri economist Pat Westhoff said corn prices are projected at $5 per bushel, down from $7 for the crop harvested last fall, in the Food and Agricultural Policy Research Institute baseline report.

The FAPRI corn price depends on expected planting of 96.9 million acres, second highest since the 1930s and just under the 2012 record. FAPRI assumes average weather and a return to trend yields of 162 bushels per acre, compared to 123 bushels in drought-stricken 2012.

More corn cuts revenue, as record yields are offset by lower prices. Corn revenue drops in 2013 and 2014. At the end of the 10-year baseline, corn prices stay just under $5 per bushels, still above pre-2007 levels.

With lower corn prices, demand returns for livestock feed and ethanol production.

A rebound in global grain and oilseed supplies sharply lowers prices for soybean and wheat crops in 2013.

Soybean production was cut by drought, but not as much as corn. Late-season rains helped yields. For 2013, FAPRI estimates new highs in soybean production, exceeding the 2009 record. Prices drop sharply.

Despite crop revenue drops, two measures suggest 2013 will be the third straight year of high income for farmers, Westhoff said. Net farm income in 2013 could reach the highest level since the early 1970s, even after correcting for inflation.

The other indicator, net cash income, declines in 2013. The two measures differ because net farm income includes changes in the value of inventories, and bigger crops should boost the amount of grain owned by farmers at year-end.

While revenues are high, farm input costs rose by 55 percent over the last six years, far higher than overall inflation. However, feed costs are expected to decline if 2013 brings average crop yields. Increased input costs moderate then slowly rise through 2022.

Both oil and natural gas prices dropped in the recession. However, oil prices rebounded and remain high, while natural gas prices dropped and stay well below pre-recession levels. Fertilizer prices increase, but remain below 2008 peak levels.

County yields

The National Agricultural Statistical Service recently released county yields for corn and soybeans for 2012.

The yields confirm that the drought significantly lowered 2012 production, with extremely low yields prevalent in southern Illinois. Corn yields were more impacted than soybean yields.

Illinois corn yields were extremely low, with some of the lowest in southern Illinois. The county with the lowest corn yield was Marion County at 19 bushels per acre. Five counties with corn yields in the 20 bushel range, all in southern Illinois, were Washington, 21 bushels per acre; Perry, 23 bushels; Richland, 27 bushels; Jasper, 29 bushels and Fayette, 29.

Central Illinois also had low yields with three areas particularly hard hit. In western Illinois, there were several counties with below 90 bushel yields including Adams and Schuyler, 76 bushels, and Brown, 87 bushels.

The highest corn yields generally were in western Illinois, centered around Mercer County, which had a 180 bushel per acre yield.

Many counties in northern and central Illinois had soybean yields averaging over 50 bushels per acre with most in southern Illinois yielding above 25 bushels per acre. Carroll County in northwest Illinois had the highest soybean yield of 59 bushels per acre. Washington County in southern Illinois had the lowest county yield at 22 bushels.

Six counties had average soybean yields higher than average corn yields, an unusual occurrence. All six were in southern Illinois -- Cumberland, Fayette, Jasper, Marion, Richland and Washington.

Compiled by Herald-Whig Staff Writer Deborah Gertz Husar.