10 March 27, 2014 2014 LOGAN COUNTY FARM OUTLOOK MAGAZINE LINCOLN DAILY NEWS.com
The break-even rate has steadily increased since 2004.
At that time, break-even prices averaged $1.67 per
bushel. Between 2004 and 2013, break-even prices
increased each year: $1.98 in 2005, $2.40 in 2006,
$2.54 in 2007, $2.88 in 2008, $3.59 in 2009, $3.69 in
2010, $4.18 in 2012, $4.19 in 2012 and $4.65 in 2013.
The increase in this dollar amount can be attributed to
both increased non-land costs and increased cash rent.
According to data provided by the University of
Illinois, this era of pricing has been marked by an
interesting pattern. Corn and soybean prices have
likely finished what have been, by historical standards,
very long runs of above-average prices. In addition,
it is unlikely that such prices will return in the near
future. However, the same data shows that it is also
atypical for a long run of above-average prices to be
followed by a long run of below-average prices. It is
more likely that any resulting trend of low prices will
be shorter than the preceding trend of high prices.
Some believe that the high corn
prices since 2006 have stimulated
an increase in foreign corn
production. The USDA estimates
the 2013 foreign production
of corn to be 46 percent larger
than production in 2006. Based
on historical data, corn acreage
outside the United States may
stabilize following the recent
decline in prices, but a substantial
reduction in acreage would not
be expected. In order for that to
happen, foreign markets would
have to witness a combination of
poor weather and lower yields.
A small increase in domestic demand for corn could
also be generated by an expansion in broiler and hog
production.
The most common reason for potentially higher corn
prices next year is the expectation that U.S. producers
will trim acreage and production in response to the
decline in corn prices.
Overall, it is very likely that the next couple of years
will see a decrease in corn prices, with some farmers
simply trying to break even. However, all is not lost,
and if history does indeed repeat itself, we will likely
see another increase in prices, even if the levels are not
as high as in recent years.
“There will probably be some cushion, and there
already has been in the market we are seeing now,” says
Fulton.
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