Chris Hurt, Purdue University ag econ Extension specialist, gets lots of attention and questions these days. With the dramatic uptick in markets, he's a popular guy. The question he is asked most often is: How high can market commodity prices go?
Hurt counters with a question of his own: Who can afford $7 corn? It's a level already reached by the market earlier this summer. His answer? "Almost no one can afford it," he retorts. "We are already seeing changes in decision making by purchasers in response to such high corn and commodity prices."
However, that doesn't mean Hurt is negative on agriculture. He's actually positive. But he's also a realist. "These are times of the highest input costs, highest risk, and yet the largest opportunities ever in the history of agriculture," he says.
The market already factored in much of the weather impact of flooding and late planting when prices shot up above $7 per bushel for corn last month, he believes. This could be a year when due to weather, the highs are put into the market either now, or at harvest. That's in sharp contrast to the past two seasons, where farmers who stored grain nearly doubled their money sometime during the marketing year. Despite his predictions, Hurt expects that lots of corn and soybeans will be stored this fall.
He compares the weather impacts this season to the 1993 season, when the other 'one in 500 year flood' in the past 15 years hit the western Corn Belt hard. This time, ag stat folks reported by mid-Jun that 20% of Iowa's crop was wiped out. In Indiana alone, 9% was estimated to be flooded at the peak of the crisis. Two weeks later, 7% of the acreage was said to be flooded.
Two factors working under the radar screen may impact which way prices go from here, at least based upon weather impact. Some of the acres reported lost could be and likely have been replanted. Obviously, yield potential is far reduced, especially for corn planted in mid-to-late June, but any crop will add to the supply, vs. no crop at all.
On the flip side yields in '93 in the flooded areas didn't turn out as good as USDA first projected in its first crop report of the season, and by a healthy margin. Hurt believes one factor that no one accounted for was that crops in earlier-saturated fields that year may have run out of nitrogen, and couldn't put the last few bushels on the ears. That could happen again this year. Even in areas where corn wasn't actually flooded in Indiana, many fields were yellow, some even after sidedressing, much deeper into spring and early summer than normal. Only time will tell how much, if any, possible N shortages impact final yield numbers across the Corn Belt.
These two factors could offset each other. Or if the N shortage in fields becomes drastic enough, crop coming in below early USDA projections could cause another rally and the scenario where prices for the marketing year could be highest at harvest time, Hurt concludes.