Higher demand for corn, soybeans helps farmers dealing with low prices

Source: By Christopher Doering, Des Moines Register • Posted: Wednesday, May 11, 2016

WASHINGTON — Farmers in Iowa and across the Corn Belt struggling to reach profitability this year got some good news from the U.S. Department of Agriculture on Tuesday.

The USDA said producers are expected to grow a record 14.43 billion bushels of corn, and 3.8 billion bushes of soybeans, which would be the third best crop ever. While the bumper crops are likely to cap the possibility of a large rebound in prices anytime soon, the federal government surprised the market by increasing its estimates for feed usage and exports. Corn and soybean prices soared following the prospect of higher-than-expected demand.

“The big surprise today, and the reason (commodity prices) are sharply higher, is they radically changed their estimates for demand,” said Tomm Pfitzenmaier, an analyst at Summit Commodity Brokerage in Des Moines.

USDA forecast average farm prices for corn and soybeans at $3.35 and $9.10 a bushel, respectively, in 2016. A year ago, cash prices for corn were $3.60 and soybeans $8.85. Iowa was the nation’s biggest producer of both crops in 2015.

Pfitzenmaier said $9.10 for many soybean producers is break-even. “For soybean producers, the light is shining quite a bit brighter — still not so great for corn producers,” he said.

Most soybean producers Pfitzenmaier has talked to have told him $10 a bushel is the level where they can lock in some profit.

A prolonged slump in commodity prices has squeezed farm income, forcing some producers to cut spending or turn to their banks for help. Farm income this year is forecast to fall to $54.8 billion, its lowest level since 2002 and down 56 percent from the high of $123.3 billion just three years ago, according to the USDA.

Steve Anderson, who farms 3,500 acres northeast of Des Moines, said he has taken advantage of the occasional spike in corn and soybeans to lock in prices that help get him closer to making money this year. His operation also has benefited from producing seed corn he sells to Monsanto, DuPont Pioneer and other agribusiness companies that farmers plant later on, a product that typically commands a premium to regular corn.

For now, he said he is “cautiously optimistic” he could break even or post a small profit this year due largely to his seed corn business. “It’s a survival attitude until we can see some numbers that show us that, hey, we’re going to show a profit for sure,” Anderson said. “The closer we get to break-even, the more likely we are to stay in business now.”

Anderson said poor weather in Brazil and a falling U.S. dollar, which has made American products more competitive overseas, have left him “feeling better” about American agriculture, but “it’s a long year ahead.”

USDA also said corn used to produce ethanol will be 5.3 billion bushels in 2016, an increase of 50 million bushels from the prior season. Iowa is the country’s biggest producer of the renewable fuel, making 4 billion gallons last year, or about 27 percent of the U.S. output.