Grain prices more challenging for state’s farmers

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by Kent Thiesse, Farm Management Analyst and VP, Lake Crystal

It appears that the days of $6 per bushel corn, and maybe even $5 per bushel corn, are behind us for the foreseeable future. Projected significant increases in corn carryover inventories, along with fairly good 2014 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 outlook for soybean prices is a bit more optimistic, but new crop soybean prices could also be challenged, if better than expected average U.S. soybean yields are achieved in 2014.
During the few months in 2014, local cash corn prices been in a range of $4 to $4.75 per bushel for 2013 corn that was stored, but not yet priced. However, local corn prices have started to drop in recent weeks, dropping by about $0.35-$0.40 per bushel since early May, with a reduction of nearly $1 per bushel from the cash corn prices for the 2013 crop a year ago at this time.
A large amount of 2013 corn that is stored on farms has already been forward priced for delivery later this spring or summer. The average market price on 2013 corn for many producers will likely be higher than current cash prices, as a lot of corn was forward priced in the late summer and early fall of 2013, before the corn prices started to decline.
Local cash soybean prices have remained much stronger in recent weeks, with many locations above $14 per bushel since early April. The strong cash soybean price is being driven by very good demand for soybeans, and a limited supply of 2013 soybeans still available.
Similar to corn, many farmers forward contracted or sold a large potion of their 2013 soybean production prior to or during harvest. Many producers sold their 2013 at very good prices; however, at price levels that were lower than the current strong soybean prices.  
According to grain marketing data from Iowa State University, local corn prices have dropped during the month of June 50 to 60 percent of the time from 2003-2013, with average decline in prices of 7 to 10 percent.
During the month of July, the percentage of declining corn prices increases to 50 to 80 percent of the time, with an average decline of another 5 to 7 percent. Based on averages in years such as 2014, current cash corn prices are likely to decline even further in the coming weeks.
The Iowa State data for soybeans from 2003-2012 shows that market prices remained stronger in June, before declining 70 to 80 percent of the time in July, with an average market decline of 6 to 8 percent.
The biggest concern with the recent drop in corn and soybean prices is for the 2014 crop year and beyond. As of June 6, the local new crop price for 2014 corn had dropped to $4 to $4.20 per bushel, and the new crop 2014 soybean prices to $11.50 to $11.90 per bushel.

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