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Tuesday, August 13, 2013

Corn prices are falling at a rapid rate, dropping 40 percent since last year

"The boom in corn prices that helped propel the U.S. farm economy is fading amid expectations for a record-high harvest," Mark Peters and Jesse Newman report for The Wall Street Journal. And "the slide is bad news for farmers who saw their incomes surge to the highest levels since the early 1970s, adjusted for inflation, while farmland values ballooned so much that some analysts worried about a bubble. Lower corn prices will squeeze profit margins, farmers who rent land for their crops might struggle to make money, and sales of tractors and other farm supplies likely will suffer."

Corn, the largest U.S. crop, saw its prices reach an all-time high last year, but are down 40 percent to their lowest point in three years, the Journal reports. Prices dropped from $8.31 a bushel last August to $4.65 as bushel last week, and analysts predict it will continue to decline. The "slide is bad news for farmers who saw their incomes surge to the highest levels since the early 1970s, adjusted for inflation, while farmland values ballooned so much that some analysts worried about a bubble. Lower corn prices will squeeze profit margins, farmers who rent land for their crops might struggle to make money, and sales of tractors and other farm supplies likely will suffer."

Corn prices were less than $2.50 a bushel, before prices surged in 2008 because of flooding and growing demand by the ethanol industry, the Journal writes. Prices have stayed around $6 a bushel the past two years. "The Department of Agriculture has projected this year's U.S. corn harvest, which starts next month, to haul in about 14 billion bushels, up from 10.8 billion bushels last year and 12.4 billion bushels in 2011. Officials are expected to increase the estimate slightly in a monthly crop report due Monday."

What farmers needs is a boost in demand for corn, the Journal writes. "U.S. corn exports have fallen to levels not seen in decades as competition from South America and elsewhere increases. And runaway growth in U.S. ethanol production is easing as the corn-based fuel supplement hits limits on how much can be blended into gasoline." (Read more)

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