What is in this article?:
- Bear market stalking high grain prices?
- Record corn
- A key uncertainty is whether the historic drought of 2012 persists through 2013.
- Bear market may be poised to bat down high grain prices.
The USDA is actually predicting record crops for corn and soybeans in 2013 if there are normal weather conditions.
“There has been much discussion about the effects of last year’s drought on corn and soybean yields in 2013,” said Glauber. “A number of factors suggest that corn and soybean yields will likely to return to trend. First, we have already seen some improvement in the eastern Corn Belt. While much of Indiana and Illinois was in drought throughout much of the summer, fall and winter rainfall has improved conditions there. Second, studies suggest that there is little correlation between seasonal precipitation in one year and the next. A dry summer in 2012 has little implication for summer precipitation in 2013. Third, research shows that corn and soybean yields are largely determined by summer weather conditions, with July weather being the most important. There is little evidence to suggest that low preseason moisture levels have significant impacts on corn and soybean yields.”
Livestock, dairy and poultry producers – stung by higher feed prices in recent years – will certainly hope Glauber’s predictions hold up. By this fall, said the economist, there should be “lower prices for most grains and oilseeds. Lower crop prices should lead to lower feed costs.”
As for ethanol production in 2013, Glauber said corn used for the fuel production will be below 5 billion bushels – at 4.7 billion bushels -- for a second straight year.
Droughts around the world in 2012 reduced global supplies for wheat, corn, and soybean supplies. “Global wheat stocks for 2012/13 are projected to be at their lowest level as a percent of use since 2008/09. Global corn stocks as a percent of use are projected to be the lowest since 1973/74. Despite record production, strong demand reduced global rice stocks as well. Soybeans stocks are anticipated to increase reflecting large anticipated production in the Southern Hemisphere, but stocks as a percent of use will remain below 2010/11 levels. Large global supplies should lead to stock rebuilding in 2013/14, but markets will remain volatile until production levels are known with more certainty.”
Global cotton stocks, said Glauber, are projected, “at 82 million bales, a record high and up 19 percent from last year. Most all of the increase has been in China where government policies have resulted in large acquisitions of cotton stocks to bolster producer prices. With China forecast to hold over 50 percent of world stocks, the world cotton outlook will depend on the sustainability of such policies over the longer run.”