It appears that the days of $5 per bushel corn prices or higher, and probably even $4 corn, are behind us for the foreseeable future. Significant increases in corn carryover inventories, along with fairly good 2015 crop conditions in many areas of the Midwest, will likely continue to put pressure on both cash corn prices, as well as new-crop prices. The projected soybean carryover inventories are also increasing rapidly, and the outlook for new-crop soybean prices is also quite pessimistic, especially if better than expected average U.S. soybean yields are achieved in 2015.
During the few months in 2015, local cash corn prices in southern Minnesota were in a range of $3.60 to $3.80 per bushel for 2014 corn that was stored, but not yet priced. However, local corn prices have started to drop in recent weeks, by about 30-40¢ per bushel since mid-April, with a reduction of nearly $1 per bushel from the cash corn prices for the 2014 crop a year ago at this time. Some of the 2014 corn that is stored on farms has already been forward priced for delivery later this spring or summer. The average market price on 2014 corn for the producers that forward priced in the late summer and early fall 2014, before the corn prices started to decline, will likely be much higher than current cash prices.
Local cash soybean prices in southern Minnesota have also been declining in recent weeks, with many locations having cash soybean prices near $9 per bushel, or lower, by early June. The cash soybean price has dropped approximately $1 per bushel since the beginning of 2015, and is nearly $2 below the local forward contract price for 2014 soybeans a year ago at this time. Similar to corn, many farmers forward contracted or sold a large portion of their 2014 soybean production prior to or during harvest, taking advantage of the stronger soybean prices that existed in 2014.
According to grain marketing data from Iowa State University, local corn prices have dropped during the month of June 50-60% of the time from 2003-2013, with average decline in prices of 7-10%. During the month of July, the percentage of declining corn prices increases to 50-80% of the time, with an average decline of another 5-7%. Based on averages in years such as 2015, current cash corn prices are likely to decline even further in the coming weeks. The Iowa State data for soybeans from 2003-2013 shows that market prices remained stronger in June, before declining 70-80% of the time in July, with an average market decline of 6-8%.
The biggest concern with the recent drop in corn and soybean prices is for the 2015 crop year and beyond. As of June 5, the local new-crop price for 2015 corn in southern Minnesota had dropped to $3.25-3.45 per bushel, and the new crop 2014 soybean prices to $8.50-8.80 per bushel. USDA is now projecting average U.S. on-farm prices for the 2014-15 marketing year at about $3.50 per bushel for corn, and $9 per bushel for soybeans.
The breakeven cost of producing corn in southern Minnesota at trend-line yields will likely be $4-4.50 per bushel for many producers in 2015, and near $10-10.50 per bushel for soybeans. Breakeven price levels could rise even higher for farmers who experience reduced crop yields in 2015, or for farm operators with higher than normal land costs. Cash rental rates for farmland have remained quite high for 2015 in many areas of the Upper Midwest, which can be a large variable in the producer break-even prices.
During 2011, 2012 and early 2013, local cash corn prices in Southern Minnesota spent very little time below $5.00-$6.00 per bushel. However, since September of 2013, local corn prices have not risen above $5.00 per bushel at most locations, and prices have not been above $4 per bushel since June 2014. Similarly, the local cash soybean price spent most of 2011, 2012 and 2013 at $12-13 or higher; however, now it appears that we could be at $9 or lower in the coming months.