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Ag Economist Expects Corn Prices to Moderate

Ag Economist Expects Corn Prices to Moderate
Still opportunity to recover all costs and make profit on crops, he says.

Don't expect $7 corn unless there is another weather disaster. And although it's always possible, it looks less likely than it did a couple of months ago, says Chris hurt, Purdue University ag economist.

The western Corn Belt and Great Plains has been dry, and is still in drought. However, the U.S. Drought Monitor shows conditions are improving in at least the northern and eastern part of that region. However, there's still a reasonable chance that the Western Corn Belt will go into planting season behind on soil moisture recharge.

Economist says there's still opportunity to recover all costs and make a profit.

Barring weather events, the ag economist sees prices settling out somewhere between $5 and $5.50 over the next four years, through 2016. Even with relatively high input costs, a farmer with average land should be able to pay all input costs, including cash rent, cover depreciation for his machinery and family living expenses – all expenses, and still have a few dollars per acre left over each year.

The soybean picture is not quite as rosy, but a farmer should still be able to at least break even, counting all costs. Many don't count in depreciation or family living expenses when figuring budgets, although they are costs that ultimately must be paid.

One reason Hurt sees corn prices flattening out is that he doesn't see much growth in ethanol production from corn. The blending wall is set at a maximum of 10% of ethanol in regular unleaded gas, despite efforts to raise it to 15%. With cars getting more mileage and due to other factors, the demand for gas has softened somewhat. Ethanol will continue to be an important use for corn, but the market probably won't show much growth due to ethanol production, he says.

While corn farmers should see reasonable incomes, the $5 to $5.50 per bushel price range should bring back profits for livestock producers. With corn at $6 to $7 per bushel, they have been losing money. But at lower corn price those industries have a chance to return to profitability as well, he notes.

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