The high cost of corn can be expected to continue at least until July. And if 2013 yields hit trend line, corn prices could fall to the $4 range.
That assessment came from Chad Hart, an Iowa State University Extension grain markets specialist.
Hart was speaking on Nov. 7 to a packed house at the Webster County Extension office during the annual Pro Ag Outlook meeting. The audience was comprised mostly of ag lenders and commodity brokers.
Because he anticipates that demand for corn cannot ramp up fast enough to sustain $7 corn if 2013 yields hit trend line, he said, "There's good incentives for 2013 to plant soybeans," which he thinks will still be averaging at $13 per bushel.
Hart said the 2012 drought trimmed 3 billion bushels off the national corn yield, the third consecutive year of below-trend harvests. "But we had the worst drought in 80 years and still produced the eighth largest yield in history.
The 2012 Iowa state average yield is projected to be a 140 bushels per acre, down 19 percent from the 2011 yield of 172 bpa. The U.S. average yield is projected to be 122 bpa, down 17 percent from 2011's 147.2 bpa.
According to the U.S. Department of Agriculture, demand is still estimated to be 11 billion bushels for new crop corn, which will sustain corn prices until summer.
Hart said he expects to see demand fall off leading up to next summer as livestock producers continue to cull their herds to protect profits.
In ramping corn demand back up, he said it'll take the poultry industry just weeks to return to full productivity, but pork producers will take months and cattle producers will require years to get back up to levels seen in 2010 and 2011.
Concerning soybeans, the drought did not hurt yields as much.
"Demand is still propping up the price," Hart said. "Import demand is still very active.
"Current prices still seem very comfortable with $7 corn and $14 beans and will likely stay there for a while"
Hart said Illinois and Kentucky both "took it on the chin" with state yield averages - 98 and 68 bpa respectively - which puts the world supply of corn on short rations.
"The U.S. is 35 percent of the world supply," he said. "So when we're short, everyone is short."
However, soybeans are a different story.
"China is the biggest driver of U.S. and South America soybeans for the past five years," Hart said, "and will continue to be for some time to come."
Weather continues to be the biggest influence in grain yields and pasture and range conditions, Hart said, and the National Oceanography and Atmospheric Administration is expecting drought conditions to persist through the Midwest until at least Jan. 1.
With farmers facing a dry spring in 2013, Hart justified his expectation that grain prices will remain high at least through the first half of 2013.