Purdue News

August 13, 1999 Ag economist: No cure for price ills in USDA report WEST LAFAYETTE, Ind. -- Commodity market expectations for bullish news in Thursday's (8/12) U.S. Department of Agriculture Crop Production report were proven wrong, and prices fell following news that price-busting bountiful crops are expected this fall. According to Purdue University agricultural economist Chris Hurt, low corn and soybean prices will persist well beyond autumn if the government's harvest predictions come true. Yield expectations for corn dropped very slightly from last month's estimates in some of the drought-plagued Corn Belt states, but for the nation as a whole, corn and soybean yield projections stayed steady -- and higher than private analysts had anticipated. The national corn yield, pegged at 134.7 bushels per acre, or 9.56 billion bushels, was significantly higher than the 131-bushel mark the market had expected, Hurt said. Indiana contributed to the surprise with an estimated average corn yield of 130 bushels per acre. "This was much higher than was anticipated by analysts, given low crop-condition ratings," Hurt said. For soybeans, the national yield was estimated at 2.87 billion bushels, or an average of 39.2 bushels per acre, which was one-half bushel higher than expected. Indiana's soybean yield estimate was 41 bushels per acre. For both crops, national yield projections are only making a bad carryover situation worse. "For corn, a crop of 9.56 billion bushels means that carryovers from the 1999 crop will continue to grow," Hurt said. "Current projections are that the carryover will grow from about 1.7 billion bushels this September 1, to nearly 1.9 billion bushels a year later. Talk of carryovers reaching 2 billion bushels was the reason market prices made lows earlier this summer." The weather still could have a positive influence on prices, however. "Since the August estimate is based on crop conditions near the first of August, the market must consider whether dry weather in early August will further reduce yield potential," he said. "Since these yield estimates are based on the expectation of normal rainfall for the remainder of the growing season, any tendency toward continued dry weather would result in yield reductions in subsequent reports." Then again, Hurt said, if weather turns better, with above-normal rainfalls, yield potentials for all crops would rise, especially for soybeans. Because of the bearish price outlook, Hurt continues to advise farmers to familiarize themselves with the government's Loan Deficiency Payment program at their Farm Service Agency offices. "Harvest-time cash prices for corn will likely move back toward the $1.70 to $1.80 range per bushel in the Eastern Corn Belt," he said. "This means the LDPs will again become important marketing tools. Producers should make sure they earn at least their county loan level, plus at least 20 cents more from on-farm storage. "In Indiana, this means an average of about $1.93 from the loan." For soybeans, Hurt estimated cash prices to be at $4 to $4.25 per bushel at harvest. With an Indiana average loan level of $5.40 per bushel, he said the LDP will be key for soybeans, too: "As with corn, farmers will want to earn the loan rate, plus a return for on-farm storage, which means an average of about $5.60 per bushel." Hurt said farmers should consider using on-farm storage if possible. "Commercial storage will be costly and may not pay," he said. "However, there will be some variation by region. Check with local grain elevator managers." Source: Chris Hurt, (765) 494-4273, hurt@agecon.purdue.edu Writer: Amy Raley, (765) 494-6682, ahr@aes.purdue.edu Purdue News Service: (765) 494-2096; purduenews@purdue.edu To the Purdue News and Photos Page