A recovery in world grain production from the poor crops in many areas in 2002, rising stocks, and escalating competition will combine to push prices lower this year for soybeans, corn, and wheat, USDA analysts say.
However, cautions Peter Riley, agricultural economist for USDA's Farm Services Agency, “our numbers are very early, and there could be a lot of changes in the months ahead.” The first official USDA supply/use projections aren't due until May 12.
Passage of the 2002 farm bill resolved a number of policy issues for growers and the industry, he said at the annual Agricultural Outlook Forum at Washington, D.C.
“Going into 2003, there's a lot more certainty than there was a year ago: Loan rates are known; the lower price outlook brings potential for marketing loan benefits; and because of slow signups under the new programs, direct payments this year will enhance farmers' cash flow before planting time.”
According to forecasts by analysts from the World Agricultural Outlook Board, the Economic Research Service, the Foreign Agricultural Service, and the Farm Service Agency, expanded plantings and higher yields are expected to result in “much larger” 2003-04 production of wheat and corn, pushing prices for corn down 20 cents a bushel and wheat 40 cents a bushel from their 2002-03 mid-point ranges.
Larger corn production is expected to more than offset expanding industrial use and exports, and wheat prices will be pressured by even greater competition in the export market, plus an expected rebound in Australia and Canada, where last year's crops were hard hit by drought.
Soybean prices are expected to drop around 30 cents per bushel, as expanding production more than outpaces gains in usage.
The 2003 plantings outlook is for more wheat and corn acres, fewer soybean acres, although combined acreage for all three crops will rise 2 million to 3 million acres from last year.
Increased plantings of winter wheat were spurred by strong prices at planting time last fall and a need for producers to generate revenue. The drop in soybean acres is expected because corn loan rates have risen relative to soybean loan rates and some producers have been disappointed with yields in recent years.