Record Grain Production Pressures Markets

(High Plains/Midwest Ag Journal) – Record corn and soybean production in 2016 has put some pressure on prices, according to Iowa State University Extension crop markets specialist Chad Hart.

“This is the fourth year in a row of record corn production. Demand continues to be positive. Corn acres are expected to be down to 90 million acres in 2017 from 94.5 million acres in 2016. This should help bring corn prices up but will put more pressure on the soybean market as acres will shift to soybeans,” said Hart during the Pro-Ag seminar in Greenfield, Iowa, on Dec. 5.

Soybeans are also in record production at 83.7 million acres in 2016. Estimates are as high as 89 million acres for 2017. Less corn and more soybeans may help demand to catch up and bring grain prices back up.

Record corn yields were seen in several states in 2016 and the records are expected to be seen in 2017 in Iowa, North Dakota, Washington, Idaho, Wisconsin, North Carolina and South Carolina. Soybean record yields are estimated for Iowa, Kansas, Minnesota, Nebraska, North Dakota, Wisconsin, Michigan and Ohio.

“We have potential for a massive crop next year. Production globally is a concern,” said Hart. “Everyone is growing more corn, except China, which has a decrease in production because of their markets. When other countries can’t afford Chinese corn, they are purchasing U.S. corn.”

Hart said China is also increasing soybean production but won’t have near enough to meet the demand in its own country for soybeans. The majority of corn and soybeans exported are used for livestock feed.

Corn exports for the remainder of 2016 and into 2017 are expected to increase. During the first half of the marketing year, the United States was the major worldwide supplier and the second half of the marketing year, South America owned the market. Severe drought in South America during its current growing season has given U.S. markets more of an opportunity.

Some countries are stockpiling grain in fear there might not be enough available when needed. The U.S. relies highly on exports and trade agreements. China imports 60 percent of the world’s soybeans and 20 percent of the U.S. soybeans.

A record year for ethanol production was seen in 2016. Hart said over the past 10 years, the U.S. has moved from the largest importer of ethanol to the largest exporter. Ethanol has helped keep corn prices from going down any more.

“Corn futures are optimistic for 2017 and 2018 and could increase as much as 30 cents (a bushel). Soybean futures are expected to be lower, perhaps because of the expected increase in acres,” said Hart.

The 2017 crop margins are still expected to be higher than 2016, which is good news for grain farmers. Profits often lead to expansion in production. Hart said the market isn’t expected to change enough to lead to much of a difference in production.

“Farmers are playing things a little differently than a few years ago. Profits need to be seen over several years before we’ll see a huge increase in acres,” said Hart.