2013 Corn prices rise as yields suffer

corn cropThe 2013 US corn crop will be shaped by two forces: severe drought and soaring prices.

In hopes of avoiding crop losses from persisting drought conditions, some US corn farmers will be converting acreage to soybeans in 2013. Others will take their chances with suboptimal moisture levels, plant more corn, and hope high prices make up for any lost crops.

High corn prices in recent years, partly due to ethanol demand, drove many farmers to repeatedly plant corn year after year. Repeated planting can deplete soil of nutrients and reduce yields. The plan for high prices to offset the possible yield reductions was not successful for many farmers in 2012. Plagued by the worst US drought in decades, corn yields were disappointing. Farmers harvested 10.7 billion bushels of corn in 2012, the lowest harvest in six years, according to the USDA.

Poor corn yields prompted some farmers to now look to soybeans, which are less dependent on moisture and naturally add needed nitrogen to the soil. Many farms in Iowa and Illinois, the highest corn-producing states, are expected to switch to soybeans. US corn yields may dip by as much as 320 million bushels in 2013 as a result, according to Reuters.

At the same time, the US corn stockpile is expected to drop to a 17-year low in summer 2013. The tight corn supply may push prices up even higher. Despite the predictions of continued drought conditions and the risks of repeated corn plantings, rising prices may tempt some farmers to increase corn acreage. Monsanto and other industry insiders forecast 2013 corn plantings at near record highs.

So which planting tactic is best for corn farmers? A conservative bet or upping the ante? Replanting and increasing corn acreage could damage the soil and present future problems. Crop rotation may secure better yields in the future, but farmers could miss out on the soaring prices in 2013. Both options seem to present risks and rewards.

For more information about the US grain farming industry, read the industry profile by First Research.

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Photo by Randen Pederson, used under a Creative Commons license.

Rebecca Mallett

Rebecca Mallett has been researching and writing about companies, industries, and executives as a member of the Hoover’s editorial team since 2007. For the past 4 years, she has focused on the agriculture and food manufacturing, business services, and mining and energy industries as a member of the First Research team. Follow her on Twitter.

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Comments

  1. Pity the farmers and ranchers faced with skyrocketing corn prices and animals to feed. Hoover’s recently updated the Koch Foods record and noted that the poultry producer has put a $45 million expansion of its plant in Fairfield, Illinois on hold indefinitely due to higher corn prices. The company hopes to more forward on the project once the price of corn stabilizes. With corn expected to be in short supply (and presumably expensive) again in 2013 it may be awhile! Interesting post Becca.

  2. Rebecca Mallett Rebecca Mallett says:

    Thanks, Alex. Yes, it looks like corn prices will remain high in 2013, which has a ripple effect through the rest of the agriculture industry. Livestock producers may turn to other feed, but the shifting demand could raise prices for soybeans and grains too.

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