Bumper Corn Crop Estimate Causes Prices To Drop

Washington, D.C. (AHN) - The recent downturn in the economy is now affecting corn producers who are worried because demand for corn, along with prices, has dropped even as the nation is experiencing its second-highest yield of 154 bushels per acre.

In July corn futures were $8 per bushel at the Chicago Board of Trade. But corn futures have plummeted to almost $4, with the sharpest drop of 30 percent in the last two weeks.

Earlier in the year there was high demand for corn because of ethanol, with oil at $150 a barrel, but that oil price has dropped below $90 recently. Corn has also come down in price by about $1.50 per bushel within the past two weeks.

"About $3.50 to $4 is the break even price." Jim Grace, a farm business management educator with the Steuben, New York, County Cornell Cooperative Extension, told The Evening Tribune. "If the market price is $4.25 or $4.50, you're making a profit, but not much."

Prices dropped after the United States Agriculture Department on Friday raised its estimate of how much corn and soybeans farmers will harvest this fall. The government forecast is now for 12.2 billion bushels of corn, up 1 percent from last month's estimate.

That forecast provides some relief for livestock producers, ethanol plants and other grain users that have already been hurt by the poor economy. Eventually, the bumper crop of corn should show up in a decrease in the prices of many food items that contain corn products.

Part of the increase in estimates for corn come because flooding didn't affect farmers as much in Iowa as had been feared. But that bumper crop in corn that is now also driving down its price is also bad news for Iowa farmers who won't be insulated from the effects of the nationwide financial crisis.

Farmers don't qualify for any government assistance if the market price is above the government price for corn, right now the government price for corn is $1.95 per bushel, according to the USDA website.

Ag department officials on Friday changed the soybean harvest yields, adjusting it up by 2 percent from last month to 2.98 billion bushels, largely because of a previous underestimate of how many acres were planted in soybeans.