The U.S. Department of Agriculture predicts the midpoint of U.S. farm prices on 2012 corn will be $7.60 per bushel, says , says Chris Hurt, Purdue Extension agricultural economist. If yields are more normal in 2013, Hurt says prices could fall by $2.10 to $5.50 per bushel - the largest ever year-to-year drop.
"The previous largest drop in the annual farm price was 73 cents per bushel for the 1986 crop," he says. "The percent reduction in 1986 was 33%, which would compare with a 28% reduction in 2013 if prices dropped to $5.50."
According to Hurt, late next summer a 2013 corn crop larger than 14 billion bushels would meet a usage base that has dropped to just 11.2 billion bushels. The market must then shift from rationing corn use from the current short crop to strongly increasing use. If corn usage were to drop that low, it would take sharply falling prices to encourage end-users to return to normal usage.
"However, some of those end-users, such as the ethanol industry, might be able to return to full usage at the flip of a switch," Hurt says. "The domestic animal-feeding sector and the export sector won't be able to build usage as quickly, and increased corn production outside the U.S. will likely compete heavily with farmers for export business."
But normal 2013 U.S. corn production is nowhere near assured, especially if drought centered in the western Corn Belt and Great Plains states persists into the growing season.
Twenty-five percent of Minnesota, 42% of Iowa, 63% of South Dakota and 96% of Nebraska are in extreme to exceptional drought - the two worst categories. All four are among the top six corn-producing states.