It’s likely corn will stay in the $3 to $4/bu range for a while. “If you look at the numbers we put out in August, we’re in the high $3.00 range, but we don’t get to $4.00 in the next couple years,” Pat Westhoff, director of the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri, says. “But, as always, we’ll have surprises.”
Corn likely won’t climb as high as $5 without a massive drought, but Westhoff still expects price recovery with more normal weather conditions in 2017. “This would lower average yields and that would help work through the massive stocks we’ve built up here and worldwide,” he says.
The U.S. has its own massive supply, but it’s not the only country in this situation. Westhoff says China is immensely important to watch.
“They have changed policies to allowed corn prices to drop in the country,” he says. “That’s positive for demand in the long run, but in the near term it means they’re going to be working to draw down their large government stocks. So it’s unlikely they’ll be a major importer in the short run.”
In South America, Westhoff says farmers should pay attention to weather and policy and how it’ll affect worldwide supply.
Soybeans, on the other hand, are seeing price pressure. With the largest soybean crop in U.S. history harvested, and record soybean plantings expected in the U.S. and South America, soybean futures are already posting lower for the 2017 crop, says Mark Ash, of USDA’s Economic Research Service.
And more soybean acreage could drive prices down, Ash cautions. “Any indications that U.S. farmers will increase 2017 soybean acreage more than expected will also apply downward pressure on prices,” he says.
“If you look at prices today it says plant beans, don’t plant corn,” says Westhoff. But he warns that input prices might reduce the advantage of soybeans. “Corn looks better when fertilizer prices are lower,” he says.
This isn’t the first year farmers have taken a harder look at swapping out corn acres for soybeans, either.
“Farmdoc showed this is the fourth year in a row where soybean profits beat corn profits in Illinois,” says Matt Bennett, corn and soybean farmer and owner of Bennett Consulting. “But now input prices have affected corn profitability and rotation is so important. I’m encouraging producers when planning for next year not to just make the assumption that the best thing to do is plant more soybeans.”
International demand for soybeans is also critical. About a third of U.S. soybeans are exported, and half of those go to China. Underpinning greater demand for U.S. soybeans is the continued growth of China’s economy and the increasing amount of soybean meal fed to pigs and poultry, says Chad Hart, ag economist at Iowa State University.
There are also uncertainties, however, about China’s demand for 2017, according to USDA. “The size of China’s 2016 domestic soybean harvest, as well as the timing and rate at which the government auctions off its reserve stocks, will influence the country’s 2016/17 import demand,” explains USDA’s Ash.
Note: This story appears in the January 2017 issue of Dairy Herd Management.