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Many factors could influence 2012 crops


This news story was published on January 9, 2012.
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Rex L. Troute, The Hawk Eye, Burlington, Iowa –

Corn and soybean prices look good, well into the future, according to Chad Hart, Iowa State University assistant professor of economics. Hart was one of the primary speakers, who addressed an overflow crowd at Friday’s Crop Advantage Series held at the Catfish Bend Casino, Convention and Events Center in Burlington.

Of course, a few things like the European financial crisis, drought in South America, supply and demand, and the unpredictability of weather could have a say in how well crops do in 2012.

Even crop estimates for the coming season are a mixed bag. Some experts are predicting higher corn and soybean production in the U.S., while others are figuring on lower numbers. The U.S. is coming off a year, where farmers produced 12.3 billion bushels of corn, which didn’t quite cover the demand of 12.6 billion bushels.

“That was one of the top five corn crops despite the weather,” said Hart.

Even with weather issues across the Hawkeye state in 2011, Iowa was considered the “garden spot” in terms of production, Hart said.

If U.S. farmers could see a yield of 168 bushels an acre this year, it would go a long way in meeting demand. Dry conditions during the growing season in southern Brazil and Argentina could raise the price of corn and the demand for America’s golden grain. Brazil tends to use most of what it produces, while Argentina is a big exporter of grain.

“China and Mexico have been our shining stars in the corn market,” Hart said, concerning U.S. exports.

The U.S. also is coming off four of the best soybean crops in the past five years. The average soybean yield for 2011 was 41.3 bushels per acre.

“The international market drove demand in 2009 and 2010,” Hart said, as China was the largest U.S. customer. “We have seen China slow down.”

Demand this year for U.S. grain will depend greatly on what China is able to produce on their own. With South America’s two largest producers, Brazil and Argentina, experiencing droughts, China most likely will have to import grain from the U.S. this year.

With corn futures hovering around $6.50 a bushel and soybeans more than $12 per bushel, the livestock industry has had trouble with profitability. Pork, beef and poultry are experiencing down markets with feed costs rising.

“We are not seeing a lot of expansion in the livestock industry,” Hart said.

With corn prices staying high, some countries and U.S. farmers are switching to wheat as their primary feed ingredient.

Two other avenues driving demand for grain are conventional biofuels, such as corn-based ethanol, and biodiesel, which uses soybeans. In 2011, the ethanol industry used 4.64 billion bushels of corn in order to meet demand for the alternative fuel. Ethanol production has remained stable, but hasn’t seen growth as ethanol plants have not been built in the past two years, Hart said.

The price of corn represents two-thirds of the cost in making a gallon of ethanol.

“Even without the tax credit, they can make money,” Hart said of ethanol manufacturers.

The ethanol industry suffered in the heart of the Great Recession, 2008 and 2009, but has recovered in the past two years.

So what’s the forecast for the 2012 corn and soybean crops? The prospects look good, Hart said.

The cost of production for corn should be around $4.41 per bushel, and $10.70 per bushel of soybeans. With future prices exceeding projected costs, U.S. farmers should have a profitable year.

“We encourage farmers to plant more corn,” Hart said, as the profit margin is higher for corn.

If the corn crop meets expectations in 2012, it will be the fourth largest crop in U.S. history.

“The last two years have yielded the best return,” Hart said.

The prospects for demand look good with South America’s drought trouble.

“Will Mother Nature cooperate? Will it let us plant the available land?” Hart said. “The market is trying to figure out this weather pattern.”

Whether the current La Nina gives way to an El Nino climate pattern, and economic concerns across the globe resolve themselves, 2012 should prove an interesting year for U.S. farmers.

“I definitely would look at crop insurance,” Hart said toward the end of his speech.

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