January 2, 2015
US crop prospects revealed for 2015
The transition from the extremely high prices resulting from the drought of 2012 to lower prices now being experienced has occurred differently for corn, soybeans, and wheat, Darrel Good from the Department of Agricultural and Consumer Economics at University of Illinois said at the 2014 Illinois Farm Economics Summit (IFES).
Corn prices have come under the most pressure due to two consecutive record large U.S. crops. Soybean prices have remained the strongest, even with large crops, due to strong demand from China.
Corn prices moved to the lowest level in five years in October 2014. Prices declined under the weight of back-to-back record large US crops and plateauing consumption of corn used for ethanol production.
Feed and residual use of corn will get a boost from low feed prices and increasing livestock numbers, but U.S. corn exports face more competition than a year ago. The record 2014 crop and lower prices are expected to result in only a small increase in total consumption during the 2014-15 marketing year.
Early expectations were for year-ending stocks to be at a 10-year high of two billion bushels. Some reduction in US corn acreage in 2015, coupled with a return to a trend yield, would result in a much smaller crop and a reduction in stocks during the 2015-16 marketing year.
After averaging close to $3.50 during the 2014-15 marketing year, corn prices are expected to rebound to the low-to-mid $4.00 level next year if production declines as expected.
Soybean prices have also declined over the past year as a result of record large South American and US crops in 2014. The price decline has not been as severe as for corn due to ongoing strong soybean demand by China and early year strength in export demand for soybean meal.
Marketing year ending stocks are expected to be at an 8-year high of 450 million bushels, but those stocks represent only 12.5 percent of marketing year consumption.
Some further modest declines in soybean prices are expected if the 2015 South American crop is as large as currently forecast and if U.S. producers expand planted acreage in 2015.
Without some reduction in U.S. acreage, the 2015 crop will exceed the current level of consumption even if average yields decline to trend value. Soybean prices are expected to average near $10 for the 2014-15 marketing year and in the upper $9.00 level for the 2015-16 marketing year.
US wheat production declined by about 100 million bushels in 2014, with soft red winter (SRW) wheat production down by 113 million bushels, or 20 percent. Still, SRW prices continued the decline that began in October 2012.
Back-to-back large wheat crops in the rest of the world in 2013 and 2014 resulted in declining US exports this year and expectations of a build in year ending stocks of US wheat.
The most important price factor moving forward will be the size of the wheat crops outside the US focus was on Russia due to on-going dry conditions that began in July 2014 and seemed to halt the decline in wheat prices.
Smaller crops in that part of the world would allow for some rebound in US wheat exports. With most of the Illinois wheat crop sold at or shortly after harvest, the average price received for the 2014 crop will be near $5.00. An average near $5.50 is expected at harvest time in 2015.