FAPRI baseline report: corn prices drop, net farm income remains strong

By Agri-Pulse staff

© Copyright Agri-Pulse Communications, Inc.

WASHINGTON, March, 8, 2013- If average weather returns in 2013, economists at The Food and Agricultural Policy Research Institute (FAPRI) expect a record 2013 corn crop and corn prices to fall by $2 per bushel.

FAPRI, of the University of Missouri, sent its U.S. Baseline Briefing Book full of projections for the agricultural and biofuel markets to Congress today.

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“In 2014 and beyond, average grain and oilseed prices remain well below the record levels of 2012/13, but well above the prices that prevailed prior to 2007,” states the report. “Corn prices, for example, average a little under $5 per bushel.”

The FAPRI corn price depends on expected planting of 96.9 million acres, the second highest since the 1930s and just under the 2012 record. FAPRI assumes average weather and a return to trend yields of 162 bushels per acre, which contrasts with 123 bushels in 2012.

The drought of 2012 caused higher prices for many crops, higher feed costs for livestock producers and larger indemnities under the federal crop insurance program, the report explains. If crop yields return to long-term trends in 2013, the result could be sharply lower grain and oilseed prices.

For the livestock sector, feed expenses approached $64 billion in 2012, more than double the 2006 level and the supply of beef and pork available for the domestic market has declined 11 percent since 2007, the report noted. FAPRI projects live cattle prices rise to $129 per hundredweight in 2013 and remain near that level for several years.

“Pork production is likely to eclipse beef in the fourth quarter of 2013 for the first time since the fourth quarter of 1962,” noted the economists.

However, “recent increase in crop prices benefited crop producers but reduced the profitability of livestock production,” FAPRI noted. “If crop prices fall in 2013 as projected, the situation will be reversed

Projected 2013 soybean production slightly exceeds the 2009 record, as acreage increases and the assumption of normal weather leads to higher average yields.

 “A rebound in global grain and oilseed supplies also contributes to sharply lower prices for soybeans and wheat for crops harvested in 2013. Cotton prices remain stagnant, in part because of large global cotton stocks,” added the report.

FAPRI said with record indemnity payments for 2012 crop losses, crop insurance net outlays exceed $13 billion in fiscal year FY 2013. Over the FY 2014-22 period, net outlays average a little under $9 billion per year. Over the FY 2013-22 period, Commodity Credit Corporation net outlays total $92 billion while Federal Crop Insurance Corporation net outlays total $91 billion.

Farm income remains strong in 2013, noted FAPRI. In fact, net farm income could set an all-time record in 2013. “Even after correcting for inflation, real net farm income could be at its highest level since the early 1970s,” states the report. 

Ethanol production declined in 2012/13 because of the drought, but domestic use is little changed, as exports have declined and imports increased. FAPRI predicts ethanol production to rebound in 2013/14, and for use to exceed the 10% blend wall. Additionally, “renewable Identification Numbers (RINs, certificates that demonstrate mandate compliance) rise in value to encourage use of higher-level blends.”

To view the entire report, click here.


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