Question: Are corn prices on a new higher plateau?
Could prices drop back to the previous $2.00+ plateau? The answer to that question depends on how one interprets history. It is well and good to draw a parallel to the move from the $1.00+ plateau for corn to the 2.00+ plateau, but in doing so one must ask what made the new level stick? Our read of the history suggests that the new plateau stuck because of the 1977 increase in the non-recourse loan rate, thereby setting a limit to how far the price of corn could fall.
After the 1996 Farm Bill effectively eliminated the use of any reserve program through the use of the marketing loan program, we saw four consecutive years of sub-$2.00 corn prices. As for the contention that higher production costs will do the trick, it did that not work in the 1998-2001 period when the government backfilled farm income with tens of billions of dollars in government payments.
This time around, there is no price safety net to make a new higher price plateau stick. Furthermore, if prices fall well below the total cost of production and stay there for several years, revenue insurance will be of little value as an income safety net for crop farmers as well.
Source: Daryll E. Ray and Harwood D. Schaffer, Agricultural Policy Analysis Center, University of Tennessee
- DuPont Crop Protection to sell certain assets to Bayer
- New research study shows the value of neonicotinoids
- Alltech Crop Science acquires South African distributor
- Monsanto invests to transform plant breeding
- Fungicide-resistant soybean diseases spreading
- Most crop futures are starting Thursday on a strong note
- ValueAct buys stake in fertilizer dealer Agrium
- Critics of Dow herbicide sue U.S. EPA over approval
- Six tips to help professionals take leaps of faith
- Nitrogen fertilization rates for corn production
- Landmark Services Co-op, Curry Seeds sign agreement
- No-till may not bring boost in global crop yields
- Los Angeles City Council votes to explore ban on GMO plants
- ASA issues statement on EPA’s neonicotinoid study
- Economist: Taxing P could reduce risk of algal blooms
- Commentary: Government wants farmers to quit farming
- Resistant weeds not controlled by fall residuals
- First responders need to prepare for agroterrorism