Farming is one of the unique industries that doesn’t always reward a successful year. A good harvest and high yield means a big supply and if that supply is not met with equal demand, prices fall.
That is exactly what is happening in the United States in 2016 as good weather is increasing the projected yield of the corn crop. The United States Department of Agriculture is predicting one of the largest corn carryover levels ever heading into 2017, leading to an expected price of $3.40 per bushel on average in 2016-17.
Depending on costs of production in the form of fertilizers and seed costs paired with land costs, such as cash rents and loan interest on land, the projected price would make it hard for many farmers to break even on planting corn.
In 2012-13, the average market price for corn was $6.89 per bushel, nearly twice what it is projected for next year. Those relatively high corn prices likely encouraged more farmers to transition to planting corn four years ago, cranking up supply while demand stayed stagnant.
The estimated total corn production for 2016 is 14.5 billion bushels, an increase of nearly one billion bushels from 2015.
Many farmers have already signed their corn sale contracts for the current crop, but it’s tough to think about planting again next year when a farmer doesn’t know if there is any money to be made.
With corn less than $4 per bushel, soybeans are likely to be more profitable for farmers to plant, so, at this time next year, many of the corn fields that dot the state may be sprouting soybeans instead.
Crop prices (July 20)
Rio Creek Feed Mill – Algoma
|Commodity||Price (per bushel)||Basis|
Fox River Valley Ethanol – Green Bay
Basis: The difference between the local cash price for a commodity and the Chicago cash price (where the Board of Trade sets national futures price).
Gas Price Averages
United States: $2.19
United States one year ago: $2.76
Wisconsin one year ago: $2.71
Northern Door: $2.34
Sturgeon Bay: $2.40
Gold: $1,315.40/troy ounce
Silver: $19.54/troy ounce
Sources: aaa.com, agweb.com, gasbuddy.com, cnn.money, Corn and Soybean Digest