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Expect Lower Crop Prices in 2013

Expect Lower Crop Prices in 2013

But they will still be historically high.

The top two factors influencing crop markets in 2013 will be the weather and the potential for a rebound in demand, which diminished last year with drought-driven high prices, Dr. Chad Hart told growers at the American Farm Bureau Federation's 94th Annual Meeting in Nashville, Tenn. Hart is associate professor and Extension economist at Iowa State University.

"We built up tremendous demand for corn the past four years. The market balanced out supply and demand in 2012," said Hart. "The question is how quickly demand can rebound in 2013. We are seeing some strength, but can it continue."

MARKETING STRATEGY: Chad Hart suggests farmers should have 10% of their crop priced by now and 30-40% by June.

Hart also noted demand for soybeans has been very strong the last five years, led by exports. "Exports are holding fairly strong with today's high prices. But, how much cushion do we have if we have another drought?"

The drought's impact on prices has caused a pull back on corn imports. "There is negative demand from customers like Japan, Mexico and China."

On the flip side, soybean export demand is positive. "There is strong demand internationally for soybeans – even at high prices. The big reason is huge demand in China."

Still, despite so many uncertainties, prices for corn and soybeans will remain historically high, according to Hart.

Not out of the woods
"We're not done feeling the effects of the weather system that's hit us over the past couple of years," the grain markets specialist said. Of the decline in corn demand, Hart said it had to happen.

"When we saw the drought coming, prices went up, demand went down. The question for 2013 is, can we move forward?"

Hart said a slight increase in demand for corn for feed suggests we can push past the pinch of high prices.

In addition, better-than-expected yields and the moderating of prices bode well for upping demand.

Although the corn export market has been cut in half because of higher prices, growers are taking little notice with domestic feed needs driving much of the demand, according to Hart. On the other hand, climbing prices have had little effect on international demand for soybeans, which got a little boost from late-season rain.

On a related note, if projection holds out for this year, Brazil will surpass the U.S. in soybean production and become the No. 1 soybean producer in the world.

Exports will grow in importance as we move forward, said Hart. "We will see more global competition. For example, the Eukraine wants to get more into corn production."

Price projections
Hart expects corn prices to maintain at the $7 level until July then fall off. "Probably looking at an average price of $5.50 price for the 2013 crop. A lot more acres went to corn in 2012 and looks like a lot more in 2013.

For soybeans Hart sees the $13.50 average price for 2012 dropping a dollar a bushel for 2013, 21-04 and 2015.

TAGS: Soybeans
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