Goshen News, Goshen, IN

January 20, 2013

FORT WAYNE FARM SHOW: Weather, overseas competitors, government policies impact farmers

By ROGER SCHNEIDER
THE GOSHEN NEWS

— FORT WAYNE -- Corn, the staple cash crop of northern Indiana farmers, is expected to return to normal production levels in 2013, which means prices per bushel will decline from very high prices offered to farmers the past two years, according to a Purdue expert.

Chris Hurt is a popular agriculture economist who is called on each year at the Fort Wayne Farm Show to brief farmers about the current and future economic conditions impacting farming. Part of his message Wednesday was that local farmers should not worry too much about last year’s drought, but keep an eye on the weather forecasts. He also said growing competition in soybean exports from Eastern Europe and South America, combined with more planted acreage in the U.S. and slowing growth in the Chinese market and domestic ethanol production will mean slipping prices for corn and soybeans.

“We have corn at profitable levels and you and I are optimistic as we see that sun go across the sky and we have this sense that we have some moisture now and we have this opportunity and boy are we going to be glad to see beautiful corn, soybeans and wheat growing in our fields in 2012,” Hurt said as he looked  across a conference room at hundreds of weathered farm faces.

“We have corn right now at $5.70 bid out of the field for new crop. That is a profitable price for us,” he said.

He said the eastern corn belt has a favorable weather forecast, with the drought expected to ease in northern Indiana by the end of March and the drought moving west of a line from Texas to Chicago. That will be a reversal of last year’s drought that reduced the Indiana and Illinois corn yields to the lowest in the nation, according to Hurt. He said Western state corn yields were pretty good and prices were very high, making 2012 a good year for those farmers.

“This is setting up where we just trade places with them. It is our turn,” Hurt said. “We get the better yields, they get lower yields and that sets up market high prices. Again, I don’t want to say I am putting a stamp on that,. That is a weather statement.”

Hurt said high prices are good for corn farmers, but corn growers must keep in mind their end users need affordable corn to make profits and stay in business. One segment is the livestock industry, which Hurt said can make profits if corn stays between $5.50 and $6 per bushel. That range also allows corn producers to make a profit, he said.

Ethanol

Low corn prices and government subsidies combined to boost the ethanol market the past few years, Hurt said, but demand for corn from that market will be flat in the coming year. Hurt said in 2012 the ethanol market consumed 5 billion bushels of corn. He forecast consumption for ethanol will reach $5.1 billion bushels this year.

“We just don’t have a lot more growth potential,” he said of the ethanol market.

Fertilizer

A positive development for crop producers that may reduce the cost of a major input, nitrogen fertilizer, are plans to build up to 35 fertilizer plants in the United States. Hurt said it has been 35 years since a new nitrogen fertilizer plant has been constructed in the United States because of the cost of natural gas and other fuels used to make fertilizer were cheaper overseas. But, because of the increased production of natural gas in the U.S. and its lower cost, there is a flurry of interest in building the new plants and moving production to the States from foreign locations.

Foreign bean competition

The massive fertile farm belt that stretches from Ohio to Colorado in the United States is not the only player in the world’s food market. Hurt said farmers in South American countries and in Eastern Europe have noticed the record high prices being paid for soybeans and the massive market for those beans in China and want to share in the good times.

“You’re not the only ones who have noticed $15, $16, $17, $18 soybeans,” Hurt said. “Acreage is really growing, particularly in South America. Everybody has recognized the growth for soybeans in China and your competitors want some of that growth,” he said.

Hurt expects the growth in the Chinese soybean market to be 5 to 6 percent in coming years.

Uncertainty

For three years in a row the corn crop yield in the United States has been below normal  while demand has increased. That combination boosted prices for corn farmers. But Hurt said there is no certainty that high prices will continue for corn, or soybeans.

“What happens when we return to more normal production in the United States and the world? Where are we going to settle out, slowing the growth rate with the supply coming back up,” Hurt asked. “That is the question we all want to know (the answer to). Is that $6 corn and $13 or $14 beans or is that $4 corn and $10 soybeans? I don’t think anybody knows the answer to that, but everybody has an opinion on that...”

His opinion? Corn will be at $5 to $6 per bushel for the next four years and soybeans $12 to $13 per bushel, according to Hurt.