Farmers ride corn price roller coaster
By Dave Dreeszen Journal business editor | Posted: Friday, August 08, 2008
HINTON, Iowa -- Sunny, warm weather in recent weeks has helped area crops mature, upping the odds for a bin-busting crop this fall.
"Right now, everything looks green and it's growing out there," said Iowa State University crop specialist Joel DeJong, who serves a seven-county area in extreme Northwest Iowa. "In some areas, I think guys are going to be able to get some personal records for yields."
But the near ideal growing conditions also have pushed down the price farmers could expect to receive for their grain. Corn, which soared to record highs near $8 per bushel in mid-June, has lost a third of its value since then, wiping out all the runup that followed the record flooding that ravaged parts of Iowa and other Midwest states.
"We've retreated so much from the peak," said Jeff Nelson, general manager of the Farmers Coop in Hinton, Iowa, which listed cash bids of $4.79 per bushel for corn and $11.89 per bushel for beans on its Web site Thursday.
"You're wondering now, what's the resting point going to be? With these markets, as you continue to go forward, it's hard to know."
After trading lower earlier this week, corn for December delivery ralled on the Chicago Board of Trade Thursday to close at $5.42, up 14.25 cents. November soybeans, which hit a near all-time high of $16 per bushel in mid-June, rose 17 cents to $12.39 a bushel Thursday.
According to some analysts, forecasts of a better-than-expected harvest have contributed to bearish market conditions. The size of the crop could become clearer Tuesday when the U.S. Department of Agriculture releases its August report.
Some ag observers insist the USDA's report in late June didn't reflect the full damage of the Midwest flooding, by some estimates the worst in more than 15 years, because it was too early to evaluate the complete impact of the floods.
Northwest Iowa, which mostly escaped the deluge, boasts what's arguably the best-looking crops in the state, DeJong said. But in some parts of central and eastern Iowa, some late-planted acres are lagging behind, raising the prospects of reduced yields.
"It's hard to predict ultimately what we're going to end up with for a crop because of the risky acres, and there's a lot of them in Iowa," DeJong said.
"We're setting pretty decent in the western corn belt," added Odebolt farmer John Scott, who serves on the Iowa Corn Growers Association Board. "In the eastern corn belt, they're pretty late. They're two to three weeks behind."
In its June report the USDA projected corn-planted areas for the 2009 crop season to stand at 87.3 million acres, 1.3 million higher than its March report. The surprise increase came as farmers planted more corn due to rising prices, partly offsetting the impact of the flooding.
"We had several producers who were planning to go to beans, and at the last mintue they changed their minds and went to corn," DeJong said.
Scott said he views the sharp decline in grain prices as part of the normal ebb and flow during the growing season.
"The markets are kind of in a normal pattern," he said. "When everybody was panicking that prices were getting too high, it just meant it had farther to fall. Everything will equal out in the long term."
The danger, he said, is that grain prices will continue to fall, while farmers' input costs, such as fuel, fertilizer and equipment will keep rising. For instance, the price of nitrogen-based fertilizer has more than tripled in cost in recent months, while the cost of diesel to fuel tractors and combines has passed $4 per gallon.
"High prices tend to be a pass through to farmers sometimes," he said. "Everybody seems to have a knack of taking advantage of it."
Lower grain prices have provided some temporary relief for livestock farmers and ethanol producers. Record prices for corn, the chief feedstock for corn-based ethanol fuel, had delayed the opening of some plants, including one near Hartley, Iowa.
Increased federal mandates for ethanol had helped drive up global prices for corn, along with increased demand from countries like China and India.
"Right now, everything looks green and it's growing out there," said Iowa State University crop specialist Joel DeJong, who serves a seven-county area in extreme Northwest Iowa. "In some areas, I think guys are going to be able to get some personal records for yields."
But the near ideal growing conditions also have pushed down the price farmers could expect to receive for their grain. Corn, which soared to record highs near $8 per bushel in mid-June, has lost a third of its value since then, wiping out all the runup that followed the record flooding that ravaged parts of Iowa and other Midwest states.
"We've retreated so much from the peak," said Jeff Nelson, general manager of the Farmers Coop in Hinton, Iowa, which listed cash bids of $4.79 per bushel for corn and $11.89 per bushel for beans on its Web site Thursday.
"You're wondering now, what's the resting point going to be? With these markets, as you continue to go forward, it's hard to know."
After trading lower earlier this week, corn for December delivery ralled on the Chicago Board of Trade Thursday to close at $5.42, up 14.25 cents. November soybeans, which hit a near all-time high of $16 per bushel in mid-June, rose 17 cents to $12.39 a bushel Thursday.
According to some analysts, forecasts of a better-than-expected harvest have contributed to bearish market conditions. The size of the crop could become clearer Tuesday when the U.S. Department of Agriculture releases its August report.
Some ag observers insist the USDA's report in late June didn't reflect the full damage of the Midwest flooding, by some estimates the worst in more than 15 years, because it was too early to evaluate the complete impact of the floods.
Northwest Iowa, which mostly escaped the deluge, boasts what's arguably the best-looking crops in the state, DeJong said. But in some parts of central and eastern Iowa, some late-planted acres are lagging behind, raising the prospects of reduced yields.
"It's hard to predict ultimately what we're going to end up with for a crop because of the risky acres, and there's a lot of them in Iowa," DeJong said.
"We're setting pretty decent in the western corn belt," added Odebolt farmer John Scott, who serves on the Iowa Corn Growers Association Board. "In the eastern corn belt, they're pretty late. They're two to three weeks behind."
In its June report the USDA projected corn-planted areas for the 2009 crop season to stand at 87.3 million acres, 1.3 million higher than its March report. The surprise increase came as farmers planted more corn due to rising prices, partly offsetting the impact of the flooding.
"We had several producers who were planning to go to beans, and at the last mintue they changed their minds and went to corn," DeJong said.
Scott said he views the sharp decline in grain prices as part of the normal ebb and flow during the growing season.
"The markets are kind of in a normal pattern," he said. "When everybody was panicking that prices were getting too high, it just meant it had farther to fall. Everything will equal out in the long term."
The danger, he said, is that grain prices will continue to fall, while farmers' input costs, such as fuel, fertilizer and equipment will keep rising. For instance, the price of nitrogen-based fertilizer has more than tripled in cost in recent months, while the cost of diesel to fuel tractors and combines has passed $4 per gallon.
"High prices tend to be a pass through to farmers sometimes," he said. "Everybody seems to have a knack of taking advantage of it."
Lower grain prices have provided some temporary relief for livestock farmers and ethanol producers. Record prices for corn, the chief feedstock for corn-based ethanol fuel, had delayed the opening of some plants, including one near Hartley, Iowa.
Increased federal mandates for ethanol had helped drive up global prices for corn, along with increased demand from countries like China and India.
Story Comments
Read More and Post Comments 1 comment(s)
Please note: The following are comments from readers. In no way do they represent the views of The Sioux City Journal or Lee Enterprises. We will not edit or alter your comments, but we do reserve the right to not post or to remove comments that violate our code of conduct. No comment may contain potentially libelous statements; obscene, explicit or racist language; personal attacks, insults or threats. Terms of Service
Case wrote on Aug 8, 2008 9:43 AM: