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Record grain prices expected through 2012

By Jennifer Carrico

CROP OUTLOOK—Iowa State University Extension Economist Chad Hart discussed the grain and feed outlook during the Farming for the Future conference in Ames, recently. (Journal photo by Jennifer Carrico.)

Weather extremes will hold grain prices at record prices through the better part of 2012, according to Iowa State University Extension Grain Marketing Specialist Chad Hart.

"Incredibly dry conditions in the Plains and southern states has put a lot of pressure on crops. The opposite conditions in North Dakota put 5.5 million acres in prevented planting," he said. "We have seen all the weather extremes possible this year."

Nearly 92.3 million acres of corn were planted this year, but Hart expects fewer to be harvested because of the weather.

"We hope for 13 billion bushels of corn to be harvested, but only 12.9 billion bushels is expected at this point," he said.

The demand for corn continues to drive the prices up. Ethanol is currently the No. 1 use for corn, followed by use for livestock feed. Exports and food production are important uses also.

The ethanol market is 10 times the size it was 10 years ago and corn is two-thirds of ethanol's input cost. Ethanol has been holding the corn market for several years.

No new ethanol plants have been built in the past two years, but currently 95 million bushels per week go into ethanol production. Hart expects to see a stabilization of the amount of corn used for ethanol as alternative feedstocks are currently being used more and more.

"With the demand for corn being more than 13 billion bushels, record-high prices are expected over the next 12 months, with prices expected to be $6.20 to $7.20 per bushel," he said. "I would love to be able to say that these high prices won't last long, but I can't. I think we saw the lull in prices in August 2010 when it was $4.20 per bushel. It will take us a while to get back to that, but we will eventually."

Because of higher corn prices, Hart said more livestock producers are looking for alternative feeds and have been feeding more wheat, especially the poultry producers.

The September USDA report showed the corn crop is still expected to be the third largest in history despite flooding and record-breaking heat.

Total U.S. corn production is predicted at 12.5 billion bushels, the third largest crop in history. U.S. yields are expected to average 148.1. The USDA projects total U.S. corn supply at 13.4 billion bushels.

Corn exports continue to push the market as well. International livestock producers feed a lot of U.S. corn. Two-thirds of the corn traded around the world originates in the U.S.

He expects corn prices to continue at the $7 per bushel range through the third quarter of 2012 and hold at $6 per bushel through 2013.

The 2011 corn supply is expected to be 200 million bushels short of the demand and the soybean supply is expected to be 100 million bushels short of demand.

Soybean acres have suffered because of the record-high corn prices. Only 75 million acres of soybeans were planted this year.

"China continues to dominate our export market, buying 80 percent of the soybeans exported," he said. "This has a huge impact on our soybean prices."

According to the September USDA crop report, soybean production is forecast at 3.09 billion bushels, up 1 percent from August, but down 7 percent from last year.

Iowa Soybean Association President Dean Coleman, a soybean farmer from Humboldt, said, "This report came as no surprise to Iowa farmers who have experienced floods, droughts, high winds--just about every adverse weather condition possible--this summer. We are also mindful of the impact for our customers, including livestock producers and other domestic markets, as well as our export partners."

The true yields and supplies won't be known until harvest is completed. Corn and soybean harvest has started in some areas.

Jennifer Carrico can be reached by phone at 515-833-2120, or by email at jcarrico@hpj.com.

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