Prices for corn, soybeans and wheat are likely to remain high in 2008, but market volatility is a constant threat, agricultural economists said recently at the American Farm Bureau Federation’s (AFBF) 89th Convention and Annual Meeting.

Increasing worldwide demand for these crops is contributing to today’s higher prices and lower stocks, but there are other factors also at work. Non-farm commodities such as crude oil also are in great demand and trading at record-breaking prices. The continuing decline of the value of the U.S. dollar is another reason farmers are seeing higher prices for their crops, though they also are concerned about rising expenses for fertilizer and other necessary supplies.

This whole price situation has not occurred overnight, and it’s not just one thing such as ethanol that’s at work, says Terry Francl, AFBF senior economist. “The demand for these crops has outrun supply for several years.”

Francl explains that agriculture is cyclical, and the agricultural economy climbs and plateaus over time. “We’re now at a new plateau,” Francl notes, as he compared current farm prices with those of previous eras. “In fact, yet another plateau may be forming now.”

Carryover stocks, says Francl, are the most important indicator of future prices, as evidenced by the most recent USDA crop reports. “It appears that we have not reached prices high enough to begin rationing use yet,” he adds.

Francl projects an average U.S. corn yield of 154 bushels an acre, with an average price of $4.60 a bushel in 2008-2009, adding there’s a 90 percent probability that corn futures could break the previous record of $5.54 a bushel set in 1996 when carryover stocks totaled 11.1 percent. That’s down significantly from just three years ago when carryover corn stocks totaled 19.8 percent.

“If there’s a production problem, $7.50 a bushel for corn is not out of the question,” he says but adds it is unlikely corn prices will reach that level.

For beans, Francl predicts an average U.S. yield of 42 bushels an acre, with an average price of $11.75 a bushel in 2008-2009. Prices for beans are “likely to continue to go up,” Francl says, because of high demand and remarkably low stocks — pegged at just 5.8 percent in the most recent USDA report.

“We are in a bidding war” for beans, he says, and it is conceivable prices could reach $13 to $14 a bushel.

Wheat yields have not increased as much as corn and soybean yields, but Francl says an average U.S. wheat yield of 43 bushels an acre is possible, with an average price of $6.60 a bushel in 2008-2009. “I’d be a little more cautious” about marketing wheat, he advises.

In addition, Francl shared tips on successful crop marketing. He urges Farm Bureau members to document overall marketing trends and individual goals and use discipline in contracting and selling on the cash market. Farmers should aim to sell at a profit, beat the average price and sell in the top half of the price range. It also is important for farmers to share their farm and market goals with family members, as well as external advisers such as bankers and brokers.

“Trying to sell everything at the top of the market is like winning the lottery,” he says. “Few farmers win, and when they do, it’s not because they’re good, but rather because they’re lucky.”

SOURCE: American Farm Bureau Federation

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