Purdue University agricultural economists responded to record corn and soybean crop projections by U.S. Department of Agriculture with a strong recommendation that growers use as much on-farm storage for corn as possible this year.
The USDA report released Sept. 11 projects record crops of 14.395 billion bushels for corn and 3.913 billion bushels for soybeans.
With increases in the various uses for corn not expected to increase as much as production, the carry over is expected to end at 2 billion bushels, up from 1.181 bushels, and bring about “a dramatic shift from the tight supplies we were facing just a few years ago,” said James Mintert, director of Purdue’s Center for Commercial Agriculture
Mintert and Corinne Alexander, another agricultural economics professor at Purdue, shared their projections during a webinar the day after the USDA report was released.
“We’re entering this marketing year (which began Sept. 1) with pretty strong carry over,” Alexander said. “This year’s a billion bushels higher in supply even than where we were last year. We see these inventories growing because supply’s exceeding demand.”
As a result, “starting in the middle of May … that price of corn just came down and down.” The price fell from around $5.10 per bushel to about $3.60 and Alexander is projecting the bottom will be between $3 and $3.25.
The center is forecasting Indiana’s harvest of corn and soybeans will exceed its storage capacity by 140 million bushels. That raises the question of which crop to store.
“Whenever you’re storing soybeans on price, you’re always making a bet on what the South American crop is going to be,” Alexander said. “We’re risk averse – that’s why we’re professors and not farmers – and so we would recommend storing corn. Unlike corn, we don’t see any bottom on soybeans.”
Alexander said the price of soybeans could be $9 a bushel or lower, which would be down from about $12.80 earlier in the year.
Tight supplies and higher crop prices in recent years reduced livestock profitability through higher feed prices until the beef and pork supply shrank enough to strongly increase meat prices this year.
Raising livestock will become even more profitable for a time as feed prices continue to decline, and Alexander said the proportion of farm income in Indiana will shift from 70 percent row crops and 30 percent animals in recent years to half and half.
The forecasts that have been out all summer for record corn and soybean harvest have focused some attention on the need for on-farm storage, and Randy Eveler, chief financial officer for Milford-based CTB Inc. said its storage system business has “seen some improvements in orders here.”
“Near term, there’s certainly plenty of corn and soybeans that need to get place in storage,” he said. At the same time, “the significant drop in prices have made the crops much less valuable.”
“When farmers have a little less money in their pockets, they tend to invest less than when there’s a lot of money in their pockets, or they tend to think about it a little more,” Eveler said.