SAN DIEGO, Calif. — Grain inventories are strong throughout the world, energy prices are falling and global economic growth is anemic, putting downward pressure on corn, soybeans and wheat prices.
Lower energy prices weigh down crop prices, but on the other hand they should lower farm input costs.
“We will see cheaper production costs from the energy side in 2016,” said Chad Spearman, grain market specialist with the market analysis firm Cattlefax, who provided a forecast of grain and energy markets at the Jan. 26-29 National Cattlemen’s Beef Association convention in San Diego.
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The world is awash with oil now, but North American exploration declined substantially in 2015, which should result in less supply this year to ease the glut and the free fall in energy prices.
U.S. crude oil production averaged 9.3 million barrels per day last year, which should drop to 9.1 million barrels in 2016, and imports will fall to their lowest levels in 20 years.
Crude oil averaged US$50 a barrel in 2015, but could well average less than $48 this year.
The result is falling retail gasoline and diesel prices. U.S. retail gas should range from $1.90 to $2.40 per gallon compared to last year’s average of $2.54 a gallon.
Diesel is expected to range from $2.10 to $2.65 per gallon.
Cheaper energy prices will likely depress corn prices, barring weather disasters affecting the harvest.
As well, the demand for corn to fuel the ethanol industry has flattened. In recent years 35 to 40 percent of the U.S. corn supply went into ethanol production but that could fall as gasoline prices fall below ethanol prices.
American corn exports are struggling as cheaper corn is available in other countries with weaker currencies.
The U.S. corn stocks-to-use ratio for the end of the current crop year is expected to be 11 to 13 percent, which prompted Cattlefax to expect corn to sell for $3.35 to $3.45 per bushel in the spring.
While corn growers will struggle, livestock feeders will benefit from the low price.
Corn prices might fall below the cost of production for some growers. Nevertheless, Spearman expects American farmers to plant 89.5 million acres of corn this year, up from 88 million acres last year.
The soybean situation is not a lot better.
“Soybean stocks-to-use levels in the U.S. are expected to rise to levels that we haven’t seen for quite some time here in the U.S.,” he said.
The USDA soybean stocks to use ratio this year is forecast at 11.8 percent, up from five percent last crop year.
Soybean price trends remain lower because supplies are ample, but the surplus is not that big.
“You are a crop away from drawing down supplies from the ample levels,” he said.
U.S. soybean exports will decline from last year’s record levels. China was a major customer, but its economic slow down might hurt future imports. Sixty percent of American soybean exports went to China last year.
Wheat is at the second highest stocks level since the late 1980s, so prices are under pressure.
U.S. wheat exports are the slowest in decades.
Wheat accounts for nearly half of total U.S. grain exports, but cheaper product is available around the world.
“Wheat is not like corn and soybeans,” he said, referring to the geographic spread of its production. “Corn and soybeans are produced in the U.S., Argentina and Brazil and Ukraine. Those are the key major producers and major exporters. That differs from wheat, which is grown everywhere. It is a much more diversified crop.”
