Farmers prepare for another big crop; demand key to prices

Corn buyers taking advantage of low prices, but tariffs 'killing' soybean markets, says U of I ag economist.

Thanks to low prices, more corn demand is expected in both the export and ethanol markets. (Illinois Farm Bureau file photo)

By Daniel Grant

Farmers continue to feel the frustration of lower crop prices as they prepare for what could be another large harvest of corn and soybeans.

But, on the bright side, lower prices sparked sales in recent months and could play a key role in limiting future declines.

“We’ve seen unbelievable corn use as we end the marketing year,” Todd Hubbs, University of Illinois ag economist, told farmers at the Illinois Farm Bureau Farm Income and Innovations Conference in Normal. “That’s a positive development. At these prices, I think corn is cheap.”

USDA projects corn exports will jump from 2.29 billion bushels in 2016/17 to 2.4 billion bushels this year.

Meanwhile, ethanol production accelerated to more than 1 million barrels per day and remains on pace to consume 5.625 billion bushels of corn this year.

“Where we’ve seen moderate growth the last few years is the export market (which totaled 1.4 billion gallons last year),” Hubbs said. “Right now, I think we’re on pace to export 1.6 billion gallons (of ethanol).”

Exports are the Achilles heel of the soybean market, though, and prices tumbled below $9 per bushel as a result.

“There’s no doubt this tariff issue has impacted soybean prices. It’s killing us,” Hubbs said. “We continue to build ending stocks.”

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Soybean ending stocks could climb from 302 million bushels in 2016/17 and 465 million in 2017/18 to 580 by 2018/19.

Ending stocks of corn, on the other hand, recently declined to almost 2 billion bushels, while new crop carryout dropped 25 million bushels to 1.5 billion bushels.

“Ending stocks are the main positive development for corn,” Hubbs said. “These lower prices we’ve seen also strengthen use.”

The ag economist noted lower U.S. soybean prices prompted recent sales to the European Union, Indonesia, Mexico and South Korea, among other destinations.

“Can all these places make up for what we’ve lost to China? I doubt it,” he said.

If U.S. crop exports remain in turmoil, Hubbs projects prices could hover around $3.65 per bushel for corn and $8.80 for beans. But, if exports normalize, prices could run higher, near $3.90 for corn and $9.50 for beans, with brief instances of $4 corn and $10 beans.

How have farmers responded to all the uncertainty?

“The number of bushels farmers produce is going to have a huge impact (on margins),” said Dennis Green, IFB District 13 director from Lawrenceville. “Maybe even greater this year than normal due to the range of crop prices.”

Denny Denton, a Bureau County Farm Bureau member, agreed.

“You’ve got to have the bushels,” he said. “It’s the name of the game.”

Denton this year “spoon feeds” his corn crop with timely applications of nitrogen, micronutrients and fungicides. He believes farmers must focus on their margins to ride out the current down cycle.

“The 1980s were bad, but a lot of younger people haven’t had to cope with it before,” Denton said. “Farmers always have hope. With current prices and what’s going on, we have to be patient. We’re hoping trade gets back to normal.”

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