Ag Economy: Corn and Soybean Prices Edge Higher Since March

DTN Ag Policy Editor Chris Clayton reported yesterday that, “The tide has turned this spring in corn and soybean prices, leaving farmers with unexpected marketing opportunities, and also possibly nagging worries about selling too early in a market rally.”

Mr. Clayton noted that, “Producers are more upbeat about the market situation than they were a few months ago when the emphasis was on just how much money farmers were going to lose per acre. Some say it’s important to take advantage of the market rallies over the past month considering how low marketing expectations were earlier this spring.”

And the USDA’s Economic Research Service (ERS) indicated yesterday in it’s Feed Outlook report that, “The 2016/17 corn price is projected up 15 cents per bushel from last month due to tighter supplies and stronger export prospects.”

The ERS report added that, “The projected range for the 2016/17 corn price received by farmers is $3.20 to $3.80 per bushel, up 15 cents on both the high and low ends of the range from last month’s projection, which was the first for the year. The resulting midpoint price of $3.50 per bushel compares with last month’s midpoint of $3.35 per bushel.”

Meanwhile, University of Illinois agricultural economist Darrel Good pointed out earlier this week at the farmdoc daily blog (“Weekly Outlook: Corn Stocks, Acreage, and Yield“) that, “Corn futures prices have increased about $0.75 since the surprisingly large 2016 corn planting intentions were reported on March 31. The strength reflects declining South American production prospects and the associated strength in export demand for U.S. corn; expectations that planted acreage fell short of intentions; and recent yield concerns associated with an extended period of hot weather.”

The farmdoc update noted that, “Producers have waited for and now welcome the higher corn prices. The higher prices coupled with uncertainty about summer weather, however, means that producers now have more price risk along with some production risk.”

Nonetheless, despite the positive price developments for corn, Bloomberg writers Alan Bjerga and Jeff Wilson reported this week that, “American farmers who expanded production using rented land during the commodity boom a few years ago are now struggling to repay loans.

A crop glut has eroded prices and sent profit to a 14-year low, but rents have barely budged and debt levels are the highest in more than three decades, government data show. Bankers are cutting back on loans that aren’t secured by land, so more farmers are tapping into a U.S. Department of Agriculture program designed to be the lender of last resort. And it’s almost out of money.”

The Bloomberg writers stated that, “The USDA’s Farm Service Agency has allocated $140 million a month on average for direct operating loans since Oct. 1, leaving just $129 million in the budget for the remaining four months of the fiscal year. With about 39 percent of U.S. farms operating on rented property, increased government intervention signals lower land values and more consolidation because debt-strapped and younger farmers will be forced to quit, according to farm groups advocating for more financial aid.”

The Bloomberg article added that, “The shortfall may be temporary. Senator Jerry Moran, the Kansas Republican who chairs the agricultural appropriations subcommittee, said in an e-mailed statement that lawmakers intend ‘to fully fund the loan programs’ for farmers in the fiscal year that starts Oct. 1.

“A rally in prices over the past three months also may help. While still well below their records, corn gained about 23 percent since the end of March and soybeans advanced 25 percent to a two-year high.”

Also with respect to the agricultural economy, a news release yesterday from the Association of Equipment Manufacturers (AEM) stated that, “It was more of the same in May for U.S. retail sales of ag tractors and combines, with under 40HP tractors leading the way and sales of larger tractors and combines continuing to lag, according to data from the [AEM], the leading trade organization for off-road equipment manufacturers and suppliers.”

The release pointed out that, “Combine sales declined 40.2 percent year-over-year for May but for January through May dropped 28.8 percent compared to 2015 year-to-date sales.”

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