US forecasts steep fall in corn, soy, wheat prices

US farm officials deepened forecasts for a drop in corn and soybean prices in 2013-14, citing prospects of a sharp recovering in yields, bringing record harvests of both crops.

The estimate for wheat prices was also reduced, but by a modest $0.20 a bushel, with Joe Glauber, the US Department of Agriculture's chief economist, flagging the prospect of "elevated levels of abandonment" of winter wheat in the drought-hit Plains.

Farmgate soybean prices will fall by 27% year on year to an average of $10.50 a bushel in 2013-14, Mr Glauber told the USDA's annual Outlook Forum, at which the agency unveils its first forecasts for the season.

That figure, a four-year low, represents a drop of $0.85 a bushel from levels projected in outline forecasts unveiled earlier this month.

Corn prices will drop even more sharply, by one-third to $4.80 a bushel, also a four-year low, and below an initial estimate of $5.40 a bushel.

 'Significantly lower prices'

The forecasts reflect an assessment that corn and soybean yields "will likely return to trend", despite the lingering in western Corn Belt areas of the drought which severely damaged crops last year.

US crop price forecasts, 2013-14, change on year and on initial estimate

Corn: $4.80 a bushel, -$2.60 a bushel, (-$0.60 a bushel)

Soybeans: $10.50 a bushel, -$3.80 a bushel, (-$0.85 a bushel)

Wheat: $7.00 a bushel, -$0.90 a bushel, (-$0.20 a bushel)

Source: USDA. Initial estimates taken from February 2013 Baseline report

Mr Glauber acknowledged that the persistence of drought was "a key uncertainty".

"Historical odds favour a rebound in crop yields, however, which should bring significantly lower prices in 2013," he said.

Research suggested "little correlation" between rainfall one year and the next, meaning "a dry summer in 2012 has little implication for summer precipitation in 2013".

Furthermore, there is "little evidence to suggest that low pre-season moisture levels have significant impacts on corn and soybean yields", with weather during the summer, and in particular in July, the most important determinant of crop size.

Planting forecasts

However, the USDA stopped short of forecasting corn and soybean plantings quite as high as the figures many analysts have been citing.

US crop forecasts, 2013-14, change on year and on initial estimate

Corn: 14.530bn bushels, +3.750bn bushels, (+95m bushels)

Soybeans: 3.405bn bushels, +390m bushels, (+70m bushels)

Wheat: 2.100bn bushels, -169m bushels, (-90m bushels)

Source: USDA. Initial estimates taken from February 2013 Baseline report

Indeed, the estimate for corn area, at 96.5m acres, represents a fall of 700,000 acres a year, and is well below a forecast of 97.7m acres from a Bloomberg survey last month, and talk by some commentators of sowings close to 100m acres.

Soybean area will rise by 300,000 acres year on year, to 77.5m acres, matching 2009's record, Mr Glauber said, although he cautioned that this figure could get a "further boost" from second-crop sowings, drilled into land cleared by the winter wheat harvest.

The corn crop will hit a record 14.53bn bushels, a rise of 35% year on year, with the soybean harvest pegged at an all-time high of 3.405bn bushels, up 12.9%.

'Elevated levels of abandonment'

In wheat, the US harvest will reach 2.10bn bushels, a drop of 7.4% year on year, and also 90m bushels below the outline forecast earlier this month.

"The decline is attributed to higher abandonment rates and a return to trend yield from last year's record level," Mr Glauber said, after undue dryness left half of hard red winter wheat in the key growing states of Kansas, Nebraska, and Oklahoma in poor or very poor health.

A year ago, the figure was 10%.

"Spring rains will be especially important in the Great Plains this year where elevated levels of abandonment are expected," he said.

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