Specialist warns that farmers will face a volatile market
By MITCH LIES
NASHVILLE, Tenn. -- An Iowa State University Extension economist advised farmers to guard against risk as they market their 2013 grain crops.
Chad Hart, a grain markets specialist, said the risk of drought is still present and demand for corn may not rebound from 2012, when demand dropped as the market adjusted for drought conditions that besieged the Midwest.
"Risk protection is key as you look at 2013," Hart said. "We've got a tremendous amount of volatility facing us, not only on the production side and what is going to go on with the weather, but also in the markets and how that demand will respond if we have another short crop.
"If you have a profitable price, be willing to take advantage of it," he said.
"Price protect where you can. Risk protect where you can," he said.
Speaking to a packed room at the 2013 American Farm Bureau's annual meeting, Hart questioned whether demand can recover after buyers scaled back purchases in the wake of last summer's drought.
"When we saw the drought coming, and the impact it was having on production, the market went into action: Prices rose and crop demand went down to match that supply," Hart said.
"My question going into 2013 ... is how quickly can that demand rebound?" he said.
Demand for corn last year fell to 11.2 million bushels, Hart said. Recovering that to historical levels of 12 million to 13 million bushels could be a challenge, he said.
Also, early season reports indicate the drought will continue in 2013, he said.
Particularly, the 2013 wheat crop looks like it could be down, he said.
"When you're looking at the wheat impact from this drought, it is not in yet," Hart said. "Our crop conditions report is indicating that the winter wheat crop did not germinate nearly like we would like to see, and that means we are looking at probably lower production," Hart said.
Drought last summer dramatically reduced corn yields, which plummeted from 147.2 bushels per acre in 2011 to 123.4 bushels per acre last year, according to a Jan. 10 USDA report.
The report projected yields up 1 bushel per acre from previous reports, but still well below recent yields that averaged 154.3 between 2009 and 2011.
As for corn usage, Hart said he believes corn going to produce ethanol has topped out.
"We've likely hit a plateau, at least for a while," he said. "We are not likely to see additional growth. The ethanol industry has produced enough that we have been able to export ethanol."
As for overall grain prices in 2013, Hart said markets are indicating a decline.
"We will likely see some recovery in those markets in 2013," he said, "which means lower prices."
Hart said growers can expect prices for corn at around $5.50 a bushel for the 2013 crop.
"You are seeing historically high prices, just not as high as they were under drought conditions," he sad.
He said he is not seeing a lot of strength in wheat futures.