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Northeast ag outlook for corn and soybeans means longer storage for upside pricing and nearby ethanol plant production.

January 9, 2015

2 Min Read

By Loren Tauer

Excerpts from the Northeast Ag Outlook in January's American Agriculturist suggests that farmers may be moving back into a more traditional "hold and hope" mode for upside corn and soybean pricing.

Last fall's corn price decline was due to economic conditions, falling oil prices, then falling ethanol prices. And, USDA projected harvest of the largest corn crop in U.S. history, the second record in a row.

Soybeans prices followed suit with a 9.3% rise in U.S. yields, compared to 2013. U.S. soybean acreage, according to USDA's mid-season estimate was 11% higher.

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Ohio, New York and Pennsylvania harvested record soybean acreages in 2014. In New York, soybeans – up 43% – have supplanted wheat as the second largest harvested crop (other than hay).

Record yields of 2014 may not be repeated in 2015. If summer growing conditions deteriorate, corn and soybean prices are likely to strengthen. Given the weak basis that typically occurs in surplus regions, many farmers will store grain believing that upside potential might be more than downside risk.

Looking ahead
Corn: A corn price less than half of the $6.89 price of two years earlier will require major industry adjustment – if low corn prices continue for more than one year. Current Corn Belt land values aren't sustainable on $3 corn.

USDA currently predicts 2015 corn prices will range from $3.20 to $3.80 per bushel. Actual prices will hinge on changing demand and the Southern Hemisphere's new crop that arrives on the world markets this spring.

Soybeans: Production of Southern Hemisphere soybeans has a more significant impact than corn production. That's because large amounts of U.S. soybeans are exported and compete with Brazilian beans.

USDA's latest projection puts 2015 soybean prices in the $9 to $11 per bushel range.

A short-run supply factor may be the U.S. rail and barge transportation system's ability to move corn and soybeans from production to usage areas, including exports. However, large amounts of corn are used in ethanol production in localized plants – typically moved by trucks. So the impact of limited trains may not be as significant as some suspect.

Ethanol-oil link: Ethanol producers had a very profitable year until the recent ethanol price drop. Plants were running flat out to produce ethanol.

Oil prices are continuing to fall, impacting ethanol prices and ethanol plant operating margins. As with most markets, biofuels have become an international market. That means more ethanol may be exported.

One issue always with a bumper crop is the industry's ability to dry and adequate store the corn until needed. Maintaining corn quality in temporary storage until consumed can be a challenge leading to deterioration in quality. Local market incentives will likely encourage on-farm storage.

Tauer is a Cornell University ag economist.

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