Tuesday, January 29, 2019

Congressional Budget office expects low corn and soybean prices for years to come; cites trade war as major factor

"Farm-gate prices for corn and soybeans, the two most widely grown crops in the United States, are stuck in a rut for years to come, said the Congressional Budget Office on Monday in its long-term budget outlook," Chuck Abbott reports for Successful Farming. "Farmers will grow near-record corn crops to generate revenue while slowly working down a soybean stockpile that is expected to approach a billion bushels this summer, the largest inventory ever."

The CBO predicted corn will stay below $4 a bushel for the next decade and soybeans won't go over $9 a bushel until 2023. For the 2019 harvest, corn is predicted to sell for $3.75 a bushel, compared to last year's $3.60, and the soybean crop will probably get $8.23, compared to $8.60 for last year's harvest. The last time prices were that low for that long was in the early and mid-2000's, Abbott reports. The forecast is based on farm-subsidy costs, crop and market conditions in late 2018, and expert opinions. 

The trade war with China was a major factor in the CBO's consideration. It has "driven down U.S. soybean prices while ballooning the soy stockpile to four times its usual size, aided by record-large harvests. Formerly, China bought 1 in 3 bushels of U.S. soybeans. Exports volume has been slow to recover," Abbott reports. Because of that, "farmers will plant far more corn than soybeans this year — 93 million acres vs 83.5 million acres — after a virtual tie at 89.1 million acres in 2018, when China was an eager customer."

The CBO predicts corn, soybean and wheat growers will switch en masse from the ARC type of crop insurance to the PLC, which offers better protection against sustained low crop prices, Abbott reports.

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