Can One Monster Crop
End the New Era of
Grain Prices?
Scott Irwin, Darrel Good,
and John Newton
University of Illinois
2014 Illinois Farm Economics Summit
The Profitability of Illinois Agriculture: Back to the Future?
http://online.wsj.com/articles/u-s-corn-stockpiles-rise-after-sharp-increase-in-output-1412093706
http://www.desmoinesregister.com/story/money/agriculture/2014/08/10/low-corn-prices-impact-agriculture/13819129/
http://agpolicy.org/weekcol/741.html
2014 Illinois Farm Economics Summit
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http://online.wsj.com/articles/u-s-corn-stockpiles-rise-after-sharp-increase-in-output-1412093706
http://www.desmoinesregister.com/story/money/agriculture/2014/08/10/low-corn-prices-impact-agriculture/13819129/
http://agpolicy.org/weekcol/741.html
2014 Illinois Farm Economics Summit
3
Monthly Farm Price of Corn in Illinois,
January 1947 - November 2014*
8.00
7.00
Price ($/bu.)
6.00
5.00
4.00
3.00
2.00
1.00
Avg.=$1.28
Avg.=$2.42
0.00
1947 1953 1959 1965 1971 1977 1983 1989 1995 2001 2007 2013
Year
Source: NASS/USDA
2014 Illinois Farm Economics Summit
*November: preliminary
4
Monthly Farm Price of Corn in Illinois, January 1947 November 2014 and Projected Future Average*
8.00
4.60 = (2.42)X(2.42/1.28)
7.00
Price ($/bu.)
6.00
5.00
$4.60 (A)
4.00
3.00
2.00
1.00
Avg.=$2.42
Avg.=$1.28
0.00
1947 1953 1959 1965 1971 1977 1983 1989 1995 2001 2007 2013
Year
Source: NASS/USDA
2014 Illinois Farm Economics Summit
*November: preliminary
5
Monthly Farm Price of Corn in Illinois, January 1947 November 2014 and Projected Future Range*
8.00
7.00
4.60 = (2.42)X(2.42/1.28)
$6.70 (H)
Price ($/bu.)
6.00
5.00
$4.60 (A)
4.00
3.00
$3.00 (L)
2.00
1.00
Avg.=$1.28
Avg.=$2.42
0.00
1947 1953 1959 1965 1971 1977 1983 1989 1995 2001 2007 2013
Year
Source: NASS/USDA
2014 Illinois Farm Economics Summit
*H: High, A: Average, L: Low
6
Monthly Farm Price of Corn in Illinois, January 1947 November 2014 and Projected Future Range*
8.00
7.00
4.60 = (2.42)X(2.42/1.28)
$6.70 (H)
Price ($/bu.)
6.00
5.00
$4.60 (A)
4.00
3.00
$3.00 (L)
2.00
1.00
Avg.=$1.28
Avg.=$2.42
$4.87
0.00
1947 1953 1959 1965 1971 1977 1983 1989 1995 2001 2007 2013
Year
Source: NASS/USDA
2014 Illinois Farm Economics Summit
*H: High, A: Average, L: Low
7
Monthly Farm Price of Soybeans in Illinois, January 1947 November 2014 and Projected Future Range*
20.00
11.04 = (4.60)X(2.4)
$18.33 (H)
Price ($/bu.)
16.00
12.00
$11.04 (A)
8.00
$7.84 (L)
4.00
Avg.=$6.15
Avg.=$2.63
$11.75
0.00
1947 1953 1959 1965 1971 1977 1983 1989 1995 2001 2007 2013
Year
Source: NASS/USDA
2014 Illinois Farm Economics Summit
*H: High, A: Average, L: Low
8
Monthly Farm Price of Wheat in Illinois, January 1947 November 2014 and Projected Future Range*
12.00
5.80 = (4.60)X(1.26)
$10.15 (H)
Price ($/bu.)
10.00
8.00
6.00
$5.80 (A)
4.00
$3.30 (L)
2.00
Avg.=$1.77
Avg.=$3.24
$5.98
0.00
1947 1953 1959 1965 1971 1977 1983 1989 1995 2001 2007 2013
Year
Source: NASS/USDA
2014 Illinois Farm Economics Summit
*H: High, A: Average, L: Low
9
Projected Distribution of the Monthly Farm Price of Corn in
Illinois during the Old and New Eras
25%
Old Era
Frequency
20%
15%
10%
5%
0%
1.00 1.75 2.50 3.25 4.00 4.75 5.50 6.25 7.00 7.75 8.50
Avg. = $2.42
Price Interval
2014 Illinois Farm Economics Summit
10
Projected Distribution of the Monthly Farm Price of Corn in
Illinois during the Old and New Eras
25%
Old Era
New Era
Frequency
20%
15%
10%
5%
0%
1.00 1.75 2.50 3.25 4.00 4.75 5.50 6.25 7.00 7.75 8.50
Avg.= $4.60
Avg. = $2.42
Price Interval
2014 Illinois Farm Economics Summit
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Projected Distribution of the Monthly Farm Price of Corn in
Illinois during the Old and New Eras
25%
Old Era
New Era
Frequency
20%
15%
Nov. 2014 = $3.40
10%
5%
0%
1.00 1.75 2.50 3.25 4.00 4.75 5.50 6.25 7.00 7.75 8.50
Avg.= $4.60
Avg. = $2.42
Price Interval
2014 Illinois Farm Economics Summit
12
Projected Distribution of the Monthly Farm Price of Soybeans
in Illinois during the Old and New Eras
30%
New Era
Old Era
Frequency
25%
Nov. 2014 = $10.15
20%
15%
10%
5%
0%
4.00
5.50 7.00
Avg.= $6.15
8.50
2014 Illinois Farm Economics Summit
10.00 11.50 13.00 14.50 16.00 17.50
Avg.= $11.04
Price Interval
13
Projected Distribution of the Monthly Farm Price of Wheat in
Illinois during the Old and New Eras
25%
Old Era
New Era
Frequency
20%
15%
Nov. 2014 = $4.80
10%
5%
0%
1.75 2.50 3.25 4.00 4.75 5.50 6.25 7.00 7.75 8.50 9.25
Avg. = $3.24
Avg. = $5.80
Price Interval
2014 Illinois Farm Economics Summit
14
U.S. Corn Use For Ethanol, 2002-03 - 2014-15 Marketing Years*
6,000
Ethanol Use (mil. bu.)
5,000
4,000
3,000
2,000
1,000
0
Source: WASDE/USDA
2014 Illinois Farm Economics Summit
Marketing Year
*2014-15: projected
15
Chinese Soybean Imports, 2000-01 - 2014-15 Marketing Years*
3,000
2,500
Imports (mil. bu.)
2,000
1,500
1,000
500
0
Source: WASDE/USDA
2014 Illinois Farm Economics Summit
Marketing Years
*2014-15: projected
16
Deviations from Trend for U.S. Corn Yield, 1960-2014*
20
Deviation (bu./acre)
10
0
-10
-20
-30
-40
1960
1965
1970
1975
Source: NASS/USDA
2014 Illinois Farm Economics Summit
1980
1985
Year
1990
1995
2000
2005
2010
*2014: Nov. Estimate
17
Deviations from Trend for U.S. Soybean Yield, 1960-2014*
8
Deviation (bu./acre)
6
4
2
0
-2
-4
-6
-8
1960
1965
1970
1975
Source: NASS/USDA
2014 Illinois Farm Economics Summit
1980
1985
Year
1990
1995
2000
2005
2010
*2014: Nov. Estimate
18
Deviations from Trend for U.S. All Wheat Yield, 1960-2014
6
Deviation (bu./acre)
4
2
0
-2
-4
-6
-8
1960
1965
1970
1975
Source: NASS/USDA
2014 Illinois Farm Economics Summit
1980
1985
1990
1995
2000
2005
2010
Year
19
Monthly Average Farm Price of Corn in Illinois,
January 1973 - November 2006
5.00
4.50
4.00
Price ($/bu.)
3.50
Average = $2.42
3.00
2.50
2.00
1.50
1.00
Source: NASS/USDA
2014 Illinois Farm Economics Summit
Month/Year
20
Sequence of Runs Above and Below Average,
Monthly Average Farm Price of Corn in Illinois,
January 1973 - November 2006
60
Above Average Prices
37
40
Number of Months
31
23
23
20
14
9
8
5
1
6
2
8
7
3
6
2
1
2
1
0
-7
-3
-1
-2
-1
-6
-7
-8
-6
-2
-3
-7
-9
-20
-8
-16
-23
-26
-32
-40
Below Average Prices
-51
-60
1
3
5
7
9
11
13
15
17
19
21
23
25
27
29
31
33
35
37
Run Sequence Number
2014 Illinois Farm Economics Summit
21
Sequence of Runs Above and Below Average,
Monthly Average Farm Price of Soybeans in Illinois,
January 1973 - November 2006
60
Above Average Prices
40
34
Number of Months
24
20
16
17
8
7
5
16
2
1
11
8
1
3
1
3
2
4
2
0
-3
-5
-1
-4
-20
-2
-3
-2
-1
-2
-8
-1
-3
-8
-9
-15
-16
-15
-40
-41
Below Average Prices
-46
-60
1
3
5
7
9
11
13
15
17
19
21
23
25
27
29
31
-57
33 35
37
39
Run Sequence Number
2014 Illinois Farm Economics Summit
22
Monthly Average Farm Price of Corn in Illinois,
December 2006 - November 2014*
8.00
+35 mo.
7.00
+7 mo.
Price ($/bu.)
6.00
+3 mo.
5.00
-6 mo.
4.00
3.00
-15 mo.
-25 mo.
Expected New Era Average = $4.60
-5 mo.
2.00
Source: NASS/USDA
2014 Illinois Farm Economics Summit
Month/Year
*November: preliminary
23
Monthly Average Farm Price of Soybeans in Illinois,
December 2006 - November 2014*
18.00
+ 46 mo.
16.00
+8 mo.
14.00
Price ($/bu.)
+1 mo./-1 mo./+1 mo.
12.00
Expected New Era Average = $11.04
10.00
-8 mo.
-14 mo.
-3 mo.
8.00
-14 mo.
6.00
Source: NASS/USDA
2014 Illinois Farm Economics Summit
Month/Year
*November: preliminary
24
FAPRI and CME Futures Market Forecasts of U.S. Marketing Year
Average Price of Corn as of December 7, 2014
4.40
FAPRI
Futures
4.20
4.19
4.20
4.04
3.99
Price Forecast ($/bu.)
4.00
3.80
3.98
3.95
3.74
3.63
3.60
3.40
3.40
3.20
3.00
2014/15
2015/16
2014 Illinois Farm Economics Summit
2016/17
Marketing Year
2017/18
2018/19
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