The transition to lower prices is occurring differently for corn, soybeans and wheat. Corn prices have come under the most pressure due to large U.S. and/or world crops in 2013. Soybean prices have remained higher due to strong demand, particularly from China.
The large U.S. corn crop in 2013 has resulted in a substantial decline in prices and will result in an increase in consumption during the current marketing year. Still, inventories will be much larger by year-end. High corn prices have resulted in a 45% increase in corn production in the rest of the world since 2005, providing prospects for on-going competition for U.S. corn. In addition, the era of rapid growth in ethanol production has passed. A small decline in U.S. acreage and a trend yield would result in a U.S. crop near 14.5 billion bushels in 2014, allowing a further build-up of inventories next year. Prices are expected to average in the low- to mid-$4 range for the 2013-14 marketing year and in the low $4 range in 2014-15.
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Both South America and the U.S. had large soybean crops in 2013, resulting in some moderation in prices. However, on-going strong soybean demand from China will prevent a sharp build-up in inventories and has kept prices at generally high levels. Another large South American harvest is expected in 2014. A modest increase in acreage and a trend yield in the U.S. would result in a record large U.S. crop in 2014. If production unfolds as expected, inventories will expand during the 2014-15 marketing year, resulting in further price declines. An average farm price near $12.75 is expected for the 2013-14 marketing year and in the $11 to $12 range for the 2014-15 marketing year.
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