Crop prices retreat from 2012 highs as drought impact dissipates

decrease font size  Resize text   increase font size       Printer-friendly version of this article Printer-friendly version of this article


One year after U.S. commodity costs hit new highs as North America suffered one of the worst droughts since the Dust Bowl of the 1930s, crop prices now are falling because of improved weather conditions.

Pricing in the third quarter for U.S. corn, soybeans and wheat is expected to drop by 9 to 10 percent compared to the second quarter, according to the IHS Supply Chain Pricing & Purchasing group at IHS Inc., a leading global source of critical information and insight. This plunge will bring pricing back to similar levels seen in the second quarter of 2012, before the drought impacted yields. U.S. corn and soybean pricing is expected to decline at even sharper rates in the fourth quarter, falling by 27 and 24 percent, respectively, while wheat will see a slight  5 percent increase.

click image to zoomIHS Inc. This figure presents the results of the IHS Global Insight Soft Commodity Price Index (GISCPI), a weekly soft commodities price index that analyzes worldwide pricing trends for core agricultural commodities. Commodities tracked by GISCPI include feed grains, food grains, meals and oils, cotton, sugar, dairy, and meats and products.

The GISCPI reflected the price declines for U.S. corn, soybeans and wheat, and has retreated from its drought-inflated 2012 levels. On July 26, 2013, the GISCPI stood at 2.30, down from the recent high of 2.87 almost exactly one year earlier on Aug. 21, 2012.

“The drought decimated the U.S. great plains and the corn belt during the summer of 2012,” said Ryland Maltsbarger, principal agriculture economist for the IHS Supply Chain Pricing and Purchasing service. “The planting season in spring 2013 started out much worse than in 2012 with a majority of the crop going in late. However, while the drought is still lingering in certain areas of the United States, we are in a better position than we were one year ago.”

Feed the world

While U.S. corn and soybean yields are expected to come in at below the trend line average in 2013, they will be much higher than they were in the previous year.

In Russia and Ukraine, the breadbasket of Europe, the weather this year was conducive to an early start to the harvest, although dry warm weather in late spring had cut production outlooks slightly. Because of the early harvest, cheap wheat supplies are beginning to flood the market.

Meanwhile, the second corn crop from Brazil avoided any kind of event that would cut down yields.

Wheat check

The magnitude of weekly wheat imports from China this year has shocked the trade. As a result, the U.S. Dept. of Agriculture has increased 2013/2014 Chinese wheat imports to 8.5 million metric tons, which is very large for China on a change basis.

Pressure crop

The bottom line for the global agricultural business is that commodity prices are being pressured by the growing reality that global grain balance sheets may actually loosen, Maltsbarger said.

Following major declines for corn and soybeans in the fourth quarter, pricing for all U.S. agricultural commodities is expected to stabilize and see some level of support after the beginning of 2014.


Buyers Guide

Doyle Equipment Manufacturing Co.
Doyle Equipment Manufacturing prides themselves as being “The King of the Rotary’s” with their Direct Drive Rotary Blend Systems. With numerous setup possibilities and sizes, ranging from a  more...
A.J. Sackett Sons & Company
Sackett Blend Towers feature the H.I.M, High Intensity Mixer, the next generation of blending and coating technology which supports Precision Fertilizer Blending®. Its unique design allows  more...
R&R Manufacturing Inc.
The R&R Minuteman Blend System is the original proven performer. Fast, precise blending with a compact foot print. Significantly lower horsepower requirement. Low inload height with large  more...
Junge Control Inc.
Junge Control Inc. creates state-of-the-art product blending and measuring solutions that allow you to totally maximize operating efficiency with amazing accuracy and repeatability, superior  more...
Yargus Manufacturing
The flagship blending system for the Layco product line is the fully automated Layco DW System™. The advanced technology of the Layco DW (Declining Weight) system results in a blending  more...
Yargus Manufacturing
The LAYCOTE™ Automated Coating System provides a new level of coating accuracy for a stand-alone coating system or for coating (impregnating) in an automated blending system. The unique  more...
John Deere
The DN345 Drawn Dry Spreader can carry more than 12 tons of fertilizer and 17.5 tons of lime. Designed to operate at field speeds up to 20 MPH with full loads and the G4 spreader uniformly  more...
Force Unlimited
The Pro-Force is a multi-purpose spreader with a wider apron and steeper sides. Our Pro-Force has the most aggressive 30” spinner on the market, and is capable of spreading higher rates of  more...
BBI Spreaders
MagnaSpread 2 & MagnaSpread 3 — With BBI’s patented multi-bin technology, these spreaders operate multiple hoppers guided by independent, variable-rate technology. These models are built on  more...


Comments (0) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left


NORAC UC4.5™ & UC5™ Precision Spray Height Control

NORAC offers two Spray Height Control systems that can be installed on most sprayer models. UC5™ is an ISOBUS system ... Read More

View all Products in this segment

View All Buyers Guides

Feedback Form
Feedback Form