January 12, 2009

US grain farmers will see lower prices this year after a record farm income last year partly due to record prices for corn, soy and wheat, said an economist.

The global recession will weaken demand for corn, soy and wheat this year, which will affect prices, according to agricultural economist Jim Sullivan.

For corn, the only strong driver for demand will be ethanol while biodiesel will drive soy demand.

This year will be clouded by declining prices, said Sullivan.

"Volatility is still there, and we will see declining prices from last summer's highs," Sullivan said.

In 2008, 30 percent of total US corn production went to ethanol and it is expected to climb to 34 percent this year.

Sullivan expects a decent supply of soy in the US and worldwide this year, and prices of soy to decrease. US winter wheat plantings will also decline due to excess supply in the US and worldwide, said Sullivan.

However, a good news is that fertiliser prices are coming down from last summer's record highs. Sullivan said farmers should delay fertiliser purchases as continued price weakening is expected.