A rebound for last year’s drought-stricken farmland means a bear is poised to bat down high grain prices. At least that was the prediction offered by Joseph Glauber, USDA’s chief economist, at the Outlook Forum in late February.

The problem with such forecasts, of course, is they can easily miss the mark. Glauber knows this all too well – and acknowledged it during his presentation – after he made similarly bearish predictions in early 2012 before devastating drought set in and grain prices skyrocketed. Just over half of the country still remains in drought.

“This year’s outlook is similar to the picture painted last year: High prices ahead of planting should encourage large corn and soybean acreages, and assuming normal yields, stock levels should rebuild and prices should moderate in 2013/14. Lower feed costs will bring relief to livestock, dairy and poultry producers and allow modest expansion over the next 12 months.

“A key uncertainty is whether the historic drought of 2012 persists through 2013. Another year of drought would likely result in large liquidation and hardship for livestock producers. Historical odds favor a rebound in crop yields, however, which should bring significantly lower prices in 2013.”

Glauber also said consumers will pay more for groceries in the short-term. However, “the increase should be small relative to increases in recent years. … While food inflation is anticipated to rise in 2013, the levels are unlikely to approach the levels reached in 2008 and 2011. USDA forecasts that food prices will increase only between 3 to 4 percent in 2013. Inflation is expected to remain strong, especially in the first half of 2013, for most animal-based food products due to higher feed prices. Food inflation is expected to be above the historical average for categories such as cereals and bakery products as well as other foods.”

Corn prices will “likely” drop “significantly.” Glauber said corn prices are forecast to average $4.80 per bushel this year -- down 33 percent from 2012’s record levels.

Other crop price forecasts:

  • Soybeans.

“Likewise, larger supplies and increased carryout will weaken soybean prices to $10.50 per bushel, down 27 percent.”

  • Cotton.

“Cotton prices are expected to increase by 3 percent to 73 cents per pound for 2013/14, reflecting tighter domestic supplies.

  • Rice.

“Rice prices are projected at $15.20 per hundredweight, up 30 cents from the mid-point of the 2012 price, in part reflecting smaller domestic supplies and ending stocks.”