Ag prices seen headed up, up, up
More of everything.
Hard as it might be to imagine after this year’s big harvest, all indications are for greater demand and rising prices for corn, soybeans and wheat in 2008, university and farm commodities specialists said Monday.
“At some point, you wonder if there’s just not enough acreage to do all that we might need to do,” said Darrel Good, a professor of agricultural economics at the University of Illinois.
The reports came as wheat hit a record $10.095 a bushel on the Chicago Board of Trade Monday before falling back to $9.68. Corn and soybeans also continued to trade at historic highs of nearly $4.39 a bushel for March corn and nearly $11.57 for January beans.
Good said demand for grain as food and fuel continues to drive the prices, and there are no signs the trends will reverse in 2008. In fact, most forecasts are for continued high prices beyond next year.
Much of the rise in prices recently has been driven by export demand, said Good. Wheat, for instance, shot up Monday based on reports of weather damage to wheat crops in Argentina and Australia.
He added that demand also is expected to remain strong for corn and soybeans as a source of alternative fuels, even though high grain and construction prices have slowed plans for some ethanol plants, including in central Illinois.
Backers of the Central Illinois Energy ethanol plant near Canton said last week cost overruns probably will force that incomplete project into bankruptcy reorganization.
A second study released Monday by U of I Extension farm-management specialists Gary Schnitkey and Dale Lattz projected farmers in central and northern Illinois stand to profit more from corn than soybeans in 2008, despite rising production costs for corn, including land and fertilizers.
“It could change in the next couple of weeks or months, but right now it seems like a trend that’s going to continue,” said Lattz. Projections for southern Illinois showed higher profits from soybeans.
The prospect of higher corn profits probably will prompt some farmers to plant corn on the same acreage next year, rather than following a traditional crop rotation, according to the report.
An online survey last month of 750 farmers nationwide by Farm Futures magazine found growers planned to increase acreage for each of the big three crops in 2008, said senior editor Bryce Knorr.
“The ones we’ve done this year have been a real moving target, because prices are so volatile, not only for corn, soybeans and wheat, but also for the costs farmers are paying,” said Knorr.
Knorr said fertilizer costs as much as $650 a ton, compared to about $530 even a few weeks ago. Worldwide demand for grain has even made it harder to obtain certain types of soybean seeds, he said.
Sangamon County Farm Bureau general manager Jim Birge said it is hard to imagine the kind of shift from soybeans to corn that took place this year, though he too expects another big corn crop in 2008.
“I think they’ll plant at least as much as last year at the minimum, and the indication is there’ll be more,” he said.
Good said demand for crops also is likely to increase farmland prices, which already were at record highs in 2007 in Illinois. The average $4,330 an acre for farmland this year was up nearly 14 percent from 2006.
Higher prices are certain to show up at the supermarket, though grain prices are only one component of food costs, Good said.
“All commodity prices are on the rise, and it’s certainly going to have an impact on retail food prices. It’s a question of what is the magnitude and what is the lag time?” he said.
Tim Landis can be reached at (217) 788-1536 or email@example.com.
Estimates of 2008 revenue and non-land costs for corn and soybeans (per acre, prime farmland).
Corn after soybeans: Revenue, $753; costs, $357; return, $396.
Corn after corn: Revenue, $715; costs, $371; return, $344.
Soybeans after two-year corn: Revenue, $545; costs, $216; return, $329.
Soybeans after corn: Revenue, $527; costs, $215; revenue, $312.
Corn after soybeans: Revenue, $715; costs, $373; return, $342.
Corn after corn: Revenue, $678; costs, $387; return, $291.
Soybeans after two-year corn: Revenue, $517; costs, $228; return, $289.
Soybeans after corn: Revenue, $498; costs, $228; return, $270.
Soybeans after two-year corn: Revenue, $465; costs, $224; return, $241.
Soybeans after corn: Revenue, $456; costs, $224; return, $232.
Corn after soybeans: Revenue, $589; costs, $363; return, $226.
Corn after corn: Revenue, $550; costs, $377; return, $173.