US grain prices in 2014 forecast to fall to lowest levels in five years as farmers stand poised to produce record corn and soybean crops to help replenish low grain stockpiles, USDA says

Nevin Barich

WASHINGTON , February 24, 2014 (Gannett Co. Inc.) – Grain prices in 2014 are forecast to sink to their lowest levels in five years, the federal government said Thursday, as U.S. farmers stand poised to produce record corn and soybean crops to help replenish low grain stockpiles.

The U.S. Agriculture Department said stronger soybean prices compared to corn will lead farmers to favor soybeans when they plant their crops this spring. Corn plantings will fall to 92 million acres, a decline of 3.4 million acres from last year, while soybean plantings will increase 3 million acres to 79.5 million, the most ever.

While the USDA did not offer crop production estimates at its Agricultural Outlook Forum, Joe Glauber, the department's chief economist, told an audience of lobbyists, agribusiness executives and other officials near Washington, that a return to more normal yields in 2014 could lead to record harvests for soybeans and maybe even corn.

Strong production would further replenish low global stockpiles, putting further pressure on prices that plunged last year as output rebounded from the drought-ravaged 2012. Corn, used in everything from animal feed to ethanol, is forecast to average $3.90 a bushel in the coming marketing year, a decline of 60 cents from the prior year, and soybeans are forecast at $9.65 a bushel, a drop of more than $3." (AT)If those forecasts are accurate, prices for both commodities would be the lowest since the 2009-2010 marketing year.

The price outlook from USDA indicated corn and soybeans could fall substantially from their existing levels. Currently, a futures contract for December corn after the 2014 harvest is going for about $4.70 a bushel and November soybeans at $11.44 a bushel on the Chicago Board of Trade.

"I think a lot of people would look at this and say, 'Whoa, that's a very pessimistic outlook," Glauber said. "Longer term I still think we have very positive aspects with what's going on in the agriculture sector, and I expect that we should see some very favorable times as we move forward and look at U.S. agriculture."

Still, Glauber warned that weather will remain the wild card, and if unforeseen developments such as a drought "emerge, we could see spikes in prices," he said.

Kevin Scott, a corn and soybean farmer from Valley Springs, S.D., said it's too early to put any significant weight in the USDA forecasts. He plans to sow equal amounts of corn and soybeans -- a total of 2,500 acres -- regardless of how the prices shake out when it comes time to plant his land.

"It's way too early to make predictions until the crop is in the ground," said Scott. "I've often found that if you follow the price before you plant it's really a mistake in the fall. I'm not going to change my crop plans based on what USDA says is going to happen."

In 2012, much of the Corn Belt was mired in the worst drought in decades that left crops withering in bone-dry fields, slashing yields and sending corn and soybean prices to record highs. Farmers, for the most part, enjoyed strong income due largely to those prices and the government-supported crop insurance program that helped cover losses.

But favorable temperatures and timely rains in 2013 helped growers rebound to produce a record corn crop and the third-highest soybean crop in U.S. history. The strong output caused grain prices to tumble last year. Corn sank 40 percent, making it the hardest hit commodity in 2013.

Now, as farmers lock in prices for crops they produce this year using future contracts, the agriculture sector is bracing for a sharp drop in income. That is expected to reduce how much growers spend and invest in their operations, a move that could have a trickle-down impact on rural America and companies linked to farmers' financial success.

USDA said last week farm income will plunge nearly 30 percent in 2014 as farmers feel the impact of lower corn and soybean prices and reduced government payments. Still, the data released by the department showed farm economy will remain historically strong, with 2014 net farm income the seventh highest since 1973 after adjusting for inflation, and $8 billion higher than the average of the previous 10 years.

Paul Schickler, president of DuPont Pioneer based in Johnston, Iowa, said in an interview that despite the slowdown, the seed company expects its revenue to increase in 2014 through higher prices and growth in overseas markets. "We've been anticipating this shift because you can't operate at $7 or $8 corn or $15 soybeans forever," Schickler said. "That's just not sustainable."

USDA's Glauber said the decline in farm income, coupled with rising interest rates, could tamp down land prices across the country. The average price for Iowa farmland rose to an all-time high of about $8,716 per acre in 2013, the fourth consecutive year that prices rose, according to an Iowa State University survey conducted in November.

"We could see cash rents fall if there are lower grain prices but all this comes after a long period of buildup in land values," he said.

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Contact Christopher Doering at cdoering(AT)gannett.com

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