Economist believes prices will take a tumble in 2015, dragging down wheat and canola
LOUISVILLE, Ky. — Farmers looking for higher prices in the grains and oilseeds markets will likely have to wait until next year.
Agricultural economist and markets analyst Bob Utterback told a recent farm meeting in Louisville that they can expect low or lower prices for their grains and oilseeds over the next two years.
He said most of the potential for corn and soybeans is on the downside, which will pressure related wheat and canola markets.
He said corn acreage might not reach the “widely speculated” projection of 88 million acres this year, but that won’t provide enough relief for the markets. As a result, prices will remain low.
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“I think we will see producers in lower margin, edge of the corn areas such as North Dakota and South Dakota, northern Minnesota pulling back corn planted acres,” he said.
However, those lower yielding regions play a small part in total North American corn yields.
As well, new growers in the southern United States are replacing cotton production with corn, planting it in March and harvesting it with good yields ahead of the Midwest crop.
The result mitigates the positive price effects of an acreage drop in northern regions.
The 90.6 million corn acres planted in 2014 was down from 95.4 million in 2013 and 97.3 million in 2012, which was the highest since 1949.
Farmers harvested 83.1 million acres last year.
“We are also hearing of 84.5 (million acres) as a low estimate. How does 85.5 or 86 sound?” he said.
Stocks to use ratios are the highest since the 1980s.
American corn production from last year is estimated at slightly more than 14.21 billion bushels, compared to 13.84 billion bu. the previous year. It was 10.73 billion in 2012, 12.35 billion in 2011 and 12.5 billion in 2010.
He believes rising ethanol use will eventually take care of the large carryover stocks, as long as corn acres remain down for the next two years.
The usual summer weather scares can also provide pricing opportunities.
“Then we wait for a July weather event to give those bulls their markets… if not, you want to (already have your crop sold),” he said.
Utterback worries the most about the soybean market.
American growers are shifting to beans to reduce operating costs and avoid corn’s large downside, which is already considered a break-even crop.
“The carryover of soybeans from the 2015 crop will be, might be, will be, the biggest in your farming lives,” he said.
He said farmers could potentially plant 88 million soybean acres in the United States.
U.S. soybean production was 3.97 billion bu. in 2013, compared to 3.35 billion in 2013 and 3.04 in 2012.
Beans were harvested from 83 million acres last year, which was up from the 76 million acres in 2013.
He believes prices could be headed toward $8 a bu. unless Brazil or the U.S. have a weather problem that seriously impairs the crops.
He said it will likely take a few years of world demand growth and rising energy prices to properly take care of surplus corn and soybean production and drive prices higher.
