January 21, 2004

 

 

High US Corn, Soybean Prices Likely To Persist

 

Corn and soybean prices in the United States have risen amid tightening supply and strong demand. Prices are expected to rise even further, increasing costs for livestock feeders, grain processors and food manufacturers.

 

Industry experts warn that even consumers may feel the effects of the price hikes as corn and soybean products pervade the food chain.

 

Last week, the U.S. Department of Agriculture said 2003 soybean production totaled 2.4 billion bushels, down 1.4 percent from the USDA's November estimate. Soybean prices soared on the cash and futures markets, topping $8 per bushel across Iowa - $3 more than a year ago, and nearly double the prices paid to farmers from 1999 through 2002.

 

The USDA also reported a 10.1 billion bushel corn crop, down 1.6 percent from November. Corn prices rose, too.

 

Market analysts expect to see higher prices for both crops - and volatile markets - in the coming months.

 

"Farmers should be prepared for some very wide swings in the markets," said Robert Wisner, an Iowa State University Extension economist.

 

Several factors are fueling such predictions.

 

Although U.S. farmers harvested a record corn crop last year, global grain supplies remain tight. In the past two years, four of the world's seven major grain-producing regions, including China, have experienced yield-reducing grain production problems.

 

Now, grain trade experts believe China is about to become a corn importer, ending its decades-long role as one of the world's top three corn-exporting nations. That would increase demand for U.S. corn, and in turn, drive prices higher in this country, experts said.

 

World soybean supplies are not as tight, although that could change quickly if South America's harvest, due to begin in February, fell short. But U.S. soybeans are in record short supply. And just four months into the new marketing year, the United States has sold 91 percent of the year's expected exports. In addition, U.S. processors are crushing soybeans at about the same pace as a year ago.

 

Both export sales and domestic processing will need to be reduced, Wisner said.