Look for Grain Prices to Remain Historically High

January 14, 2013

2 Min Read
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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, Chad Hart told growers at the American Farm Bureau Federation’s (AFBF) 94th Annual Meeting.

Still, despite so many uncertainties, prices for corn and soybeans will remain historically high, according to Hart, associate professor and Extension economist at Iowa State University.

“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 during AFBF’s session on the outlook for corn, soybeans, wheat and cotton. 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 United States as the world’s top soybean producer.

 “The [price] story changes a bit with wheat,” which has given up a lot of land for corn and soybeans, despite an increase in the use of wheat for feed. Cotton, too, has given up a lot of land, and that’s unlikely to change with cotton prices depressed largely because of the large reserve of cotton.

“Until [China’s] cotton market moves, it’s going to be hard for cotton to gain upside traction,” Hart said.

The drought and the high prices it led to have caused a drop in biofuel demand, which until recently was steadily climbing. Hart said that he doesn’t expect much growth, if any, in the ethanol industry, at least over the next few years.

 

 

 

 

 

 

 

 

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