Chicago Tribune By Kelly Yamanouchi, Tribune staff reporter. Tribune wire services contributed to this report.
Ample stockpiles, declining demand and indications of a potentially huge corn and soybean crop are depressing prices for these heartland commodities and promising tough times for Midwest agriculture.
Even as Corn Belt farmers wrap up their planting season, they have little reason to believe that the return on their crop will be much better than it was in the 2000-2001 season, when farmers averaged about $1.85 a bushel for corn--roughly 25-year lows.
"The prices are very depressing," said George Cramer, who farms more than 500 acres of corn in Edwards, Ill. " We are hit pretty hard by these increased fuel prices now, and virtually everything we buy keeps going up. It's definitely got the possibility of being one of the worst years."
At the Chicago Board of Trade some futures contracts already are trading below the $2-a-bushel benchmark; corn for July delivery, for instance, settled at $1.97 a bushel on Friday, down more than a penny.
Prices for corn, the nation's biggest cash crop and Illinois' most important, have been steadily declining for the past few weeks.
"The market's a little bit undervalued right now, even before the crop has gotten to any key growing period," said Brenda Tucker, a market analyst at Chicago research firm AgResource.
In addition, the Agriculture Department dealt the corn market a sharp blow Thursday when it estimated that corn stockpiles, known as "ending stocks," would be nearly 2 billion bushels at the end of the 2000-2001 season.
The USDA projected ending stocks from the new crop being planted now at 1.9 billion bushels, far above earlier estimates of 1.506 billion to 1.606 billion.
Estimates for demand were bearish, too--not surprising as economic growth slows worldwide.
The outlook for soybeans, which many Corn Belt farmers also grow, took a hit in the report, too. The USDA forecast a record crop of 2.985 billion bushels of soybeans, an 8 percent increase over last year, as well as a price decline of 20 cents to $4.20 per bushel.
Signs of weather that could cut the size of the crop would be expected to support prices. Wheat, for instance, has rebounded lately, as a drought on the Southern Plains led to projections for a smaller-than-expected harvest.
"The estimate here on yields is purely an estimate," and actual yields naturally will depend on rains and summer heat, said Dale Durchholz, a market analyst for AgriVisor. "From Memorial Day forward, Mother Nature's all that matters to the market."
Although many farmers remain optimistic that weather will push up prices by the fall, the price estimates still caused concern.
"Every year we've been hoping for that number to change," said Gregory Koeppen, a spokesman for the Lake County Farm Bureau. "The agriculture economy has struggled over the last several years, and with the latest corn prices, I really don't see the light at the end of the tunnel for farmers in Illinois."
Added John Bruntjen, a corn and soybean farmer in central Illinois: "People are beat down. They're starting to get demoralized."
The upshot: Huge amounts of federal aid.
The outlook is expected to lend further support in Congress to an emergency farm aid package similar to those bestowed in previous years.
Lawmakers have given farmers $25 billion in extra aid over the last three years to compensate for drops in grain prices. This year, about $5.5 billion is earmarked for a farm bailout.
As always, farmers continue to look for signs that demand will increase--as it did during the Asian economic boom of the mid-1990s, when expanding livestock herds in that region gobbled up U.S. feed grains.
Corn exports would get a boost again, many analysts believe, if trade relations with China were expanded, and the Chinese market opened for competition.
Corn Belt farmers also see potential for increased beef exports to boost demand for feed grain. And high petroleum prices could encourage greater use of corn for ethanol fuel.
Noted Illinois Rep. Raymond Poe (R-Springfield), an Illinois corn and soybean farmer: "I think ethanol exports and possibly more exporting of our red meats is a place that could be a shiny spot in agriculture."
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