Robert Pore's Ag Blog

With the Nov. 7 election edging closer and the next Congress possibly set to write a new farm bill, a University of Illinois marketing specialist said rising crop prices could have implications for farmers and farm policy.

Also, the American Corn Growers Association is warning consumers to watch for price gouging by food processing companies as rising crop prices will cause food prices to increase.

Nebraska farmers are about a week behind in corn harvest, according to the state weather and crop report for the week ending Oct. 15.

The Nebraska Agricultural Statistics Service estimated that corn harvest is 26 percent complete, behind last year’s 41 percent and the average of 34 percent.

Irrigated corn fields were rated 72 percent good or excellent, down from last year’s 83 percent. Dryland corn fields were rated 28 percent good or excellent, down from last year’s 39 percent.

Corn moisture levels were continuing to run high, and producers were concerned about stock rot and corn droppage.

Statewide soybean harvest is about 73 percent completed, which is about a week behind last year’s 87 percent but even with the average.

Lower-than-expected corn production and increasing demand due to increasing ethanol production and trade are driving corn prices up, said Darrel Good of the University of Illinois.

Good said December 2006 corn futures reached a contract high of $3.17 on Oct. 13, 81 cents above the mid-September low.

Cash corn prices Tuesday, according to the Aurora Co-op, ranged from $2.90 in Central City to $2.80 in St. Paul. In August, cash corn prices were averaging $2.05 per bushel statewide.

Rising prices partially reflect an estimated decline of nearly 800,000 bushels from the USDA’s September estimate and its October estimate.

Good said with consumption of U.S. corn during the current marketing year forecast at 11.89 billion bushels, year-ending stocks are forecast at a meager 996 million bushels.

The Aurora Co-op Tuesday showed local cash wheat prices running at more than $5 per bushel and soybean prices averaging more than $5.20 per bushel. In August, prices in Nebraska averaged $4.10 per bushel for wheat and $5.10 for soybeans.

Good said old-crop wheat prices are being driven by prospects for a 2006-07 world wheat crop that is 5.4 percent smaller than last year’s crop and 4.8 percent less than projected consumption.

“Among the major wheat producers, only China is expected to have a larger harvest than last year,” he said. “The largest drop in production, 55 percent, is expected in Australia.”

He said world wheat stocks as a percentage of use are expected to decline to a record low level this year.

The USDA projects the U.S. average farm price of all classes of wheat during the current marketing year to fall in a range of $4.10 to $4.70. The record-high average price was $4.55 in 1995-96, he said.

With corn and wheat prices increasing, Good expects that acreage devoted to wheat and corn will increase and that acreage of most other crops will decline in 2007.

Current futures prices for the 2007 corn and soybean crops favor corn production over soybean production in parts of the Corn Belt, Good said.

He said the prospect of ample U.S. and world soybean stocks in contrast to small corn stocks and rapidly growing corn consumption suggests that corn acreage needs to increase at the expense of soybeans and other crops in 2007.

“It will be up to the market to give the appropriate signals, avoiding the mistake of a year ago when the market incorrectly signaled more soybean and fewer corn acres,” Good said.

He said projected prices are well above current support prices, so producers may receive only direct payments for the 2006 crops.

“The main issue is whether these higher prices are expected to persist,” Good said. “If so, Congress could respond by keeping commodity programs generally intact in order to minimize budget exposure.”

But Congress could view this as an opportunity to move the focus of policy away from price supports, he said.

“A related issue is whether Congress will reduce or eliminate current domestic and trade policies that prevent the market from directing production and consumption decisions,” Good said.

Keith Bolin, president of the American Corn Growers Association, said while commodity prices are on the rise right now, prices paid to farmers for corn and other grains have fallen by 40 percent since 1996.

“Recent crop and price projections by the U.S. Department of Agriculture indicate a modest recovery in prices paid to grain farmers,” he said.

Bolin said the organization wants to make sure consumers are not victimized by some in the food processing industry who may overprice their products due to the modest recovery in grain prices.

He said despite the increase in corn prices paid to farmers, a 25-cent increase for a bushel of corn (56 pounds) is less than one half of one cent per pound.

“That means that the farmer’s share of the increase to the consumer for a box of corn flakes is less than a penny,” Bolin said. “If consumers are forced to pay more than a penny increase, we would say that price gouging has occurred.”