Stormy weather for soybean, corn prices

Soybeans, wheat, corn dismal | The end of the ethanol industry expansion and huge ending stocks mean bearish outlook

CALGARY — Farmers should prepare for crop prices well below the average of the 2006-13 “ethanol era” unless they base their expectations on disasters happening elsewhere, says Informa Economics.

“We expect price pressure to be pretty inexorable,” Informa executive vice-president Rob Westmoreland said at his firm’s annual Canadian market outlook conference.

“As we look out to next fall, conservatively talking about sub-$9 soybeans.”

All three major North American market-dominant crops are set to stay down in the doldrums, Informa analysts said. A reasonable guess for soybeans is $8.50 per bushel in 2015-16, $5-something per bu. for soft red winter wheat and about $3.50 per bu. for corn.

That grim assessment is based on stocks in all three major world crops being replenished after the just-ended Northern Hemisphere harvests and a likely big harvest in South America. Farmers shouldn’t assume today’s new crop futures prices will last.

“Don’t forget to take out a little protection. Sell something. Betting on another drought someplace probably isn’t a good idea,” Westmoreland said.

He said the market needs to convince some farmers to cut their acreage for the first time since crop demand began to increase to feed the ethanol industry.

“We’ve got to go to a level that makes somebody say, ‘ouch,’ and retreat from planting that next crop,” Westmoreland said.

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It’s probably too late to do that to U.S. farmers’ intentions for next spring, but South American farmers might become leery of keeping all their acres in production at the prices expected for late 2015.

“You kept planting at $11 (per bushel for soybeans)? Let’s try $8,” said Westmoreland.

Fellow Informa analyst Nick Hoyt said convincing farmers to cut production won’t be easy.

“The reality is that it’s really hard to do,” said Hoyt.

“Once you’ve brought that land online … without something ex-treme, most people are going to try to plant again.”

U.S. corn yields have recovered from 2012’s drought-reduced levels to produce massive crops and fill storage systems. The 2015 corn crop will likely yield 166 bu. per acre, but some analysts are predicting more than 170.

That means ending stocks should be the highest in decades.

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Farmers should expect average corn prices to be 25 percent lower for next year from a likely 2014-15 average of $4.50 per bu.

“We actually believe we’ll average below $3.50,” said Hoyt.

Westmoreland said the end of ethanol expansion and the weakening interest of outside money in agricultural commodities has set up an unpromising period for anything bullish to happen.

However, the biggest cause of the likely prolonged weakness ahead is the big crops farmers have produced and the big stocks left over at the end of this and probably coming years.

This year’s large U.S. soybean crop “completes the hat-trick (of stocks replenishment) and we wind up with our major crops at least in pretty good shape from a stocks situation as we come to the end of the ’14-’15 seasons unless there is a severe accident someplace,” said Westmoreland.

Crops such as durum and high protein spring wheat might show better upside potential, he acknowledged, but they will be side shows to a generally glum period.

“Several factors have come to bear at once,” said Westmoreland.

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“Everything is leading towards sort of the negative.”