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Corn prices to fall despite drop in sowings - USDA

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US corn sowings this year will drop by more than 3m acres, although this will be insufficient to prevent prices of the grain falling to five-year lows – as will values of cotton, soybeans and wheat too.

The US Department of Agriculture, in its first formal forecasts for crop sowings for the 2014 harvest, pegged corn plantings at 92.0m acres.

While well down on the 95.4m acres sown last year, it still represents a historically high figure, the fourth largest since World War II, putting the potential for a record harvest on the cards.

"A return to normal yields for spring-planted crops could see soybean and corn set new production records," USDA chief economist Joseph Glauber said.

The boost to supplies looks set to depress US corn prices to an average of $3.90 a bushel in 2014-15, down $0.60 on that expected this season, and the lowest since 2009-10.

Record sowings

For soybeans, plantings should set an all-time high of 79.5m acres, Mr Glauber told the USDA's Outlook conference.

That represents a rise of 3.0m acres in plantings year on year, and is 1.5m acres more than the USDA proposed in its long-term Baseline forecasts which were released last week but drawn from calculations made late last year.

"The stronger soybean prices relative to corn should favour soybean plantings this year," Mr Glauber said.

"The soybean-to-corn futures price ratio for fall 2014 delivery has been at 2.5, which favours soybeans."

The USDA forecast soybean prices tumbling 24% to an average of $9.65 for 2014-15, again a five-year low.

Wheat prospects

For wheat, the USDA forecast plantings of 55.5m acres, down 700,000 acres year on year, and ditching ideas of a rise in sowings as projected in the Baseline estimates.

Mr Glauber highlighted the 1.1m-acre drop in seedings soft red winter wheat, grown largely in the Midwest, which has already been revealed.

Although spring wheat plantings are, at 13.6m acres, expected to increase, assuming better sowing weather that the particularly wet conditions last year, that represents a 500,000-acre increase, offsetting only part of the drop in winter wheat.

Nonetheless, wheat prices are seen tumbling 22% to $5.30 a bushel.

Price signals

Cotton and rice will join soybeans in picking up extra plantings, thanks to pricing signals, with the crops contrasting with peers in seeing higher price expectations for 2013-14.

"Cotton prices which are expected to fall less than competing crops will make cotton plantings relatively more attractive, resulting in higher acreage in 2014," Mr Glauber said, unveiling a forecast for sowings up 1.1m acres at 11.5m acres.

For rice, plantings will soar 16.5% to a four-year high of 2.9m acres, as "high prices encourage some expansion".

However, the growth is expected in the south east, rather than in California, where Mr Glauber noted that the state's drought could lead to a drop in area for short- and medium-grain rice "if producers opt to sell their water rights".

Although California's drought should help keep a floor under rice prices, cotton prices were seen falling 10.5% to 68 cents a pound in 2014-15, also the weakest price in five seasons.

By Agrimoney.com

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