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Agricultural Outlook 2006: Trends in Corn and Soybean Yields, Prices, and Market Strategies

This report from the Purdue Cooperative Extension Service details the agricultural outlook for 2006, highlighting trends in corn and soybean yields, market prices, and strategic recommendations for farmers. It compares the challenges of 2005 with forecasts for 2006, including rising input costs and fluctuating animal prices. Key insights cover government policy implications, price strategies for corn and soybeans, and analysis of land values and rental trends. Farmers are encouraged to consider market conditions and fiscal policies when planning for the upcoming season.

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Agricultural Outlook 2006: Trends in Corn and Soybean Yields, Prices, and Market Strategies

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  1. AG OUTLOOK 2006 PURDUE COOPERATIVE EXTENSION SERVICE

  2. 2004: Great corn and soybean yields. Some High grain prices. High animal prices for beef, hogs, and milk. • 2005: Low Corn yields. Higher input costs. Lower hog and milk prices. • 2006: Average yields? Much higher input costs. Lower beef, hog, and milk prices.

  3. Forecast for 2006

  4. Crude Oil Futures The Future?? $40 $25 $20 $12

  5. U.S. $1.75 Gasoline Europe $5.00 Gasoline 17.3 Feet Curb Weight: 5,842 7.5 Feet Curb Weight: 1,388

  6. Government Policy • Just two more years under current bill 2006 to 2007 crops. • Review LDP rules for Corn: • Today’s LDP is based on yesterday’s Posted County Price. • 60-day MLG Lock-in rule (CCC-697). • 2007 Farm Bill Driven By: • WTO: Cotton LDP’s are not legal. Impact soybeans, corn, and wheat as well for 2007 Bill. • Federal budget deficits. Will Congress cut payments to agriculture?? • Political Landscape: House Ag committee has changed leadership, Senate is more intact. • Likely Implications for 2007 Farm Bill • Reduced spending for agriculture. • Broad based programs like EQUIP and CSP. Less commodity based. • Changes in the form and level of LDP payments.

  7. Food Prices Lower than General Inflation! • Grocery store food prices up 1.4% in last year much lower than the than 3.2% general inflation. • Led by lower dairy and egg prices, and generally lower commodity prices after hurricanes, and BSE last year. • Greater competition from food warehouses and super centers. • Katrina: Higher coffee, bananas, chicken, seafood • Over the next year: • Restaurant prices +2% to 3% • Food store prices +1% to 2%

  8. 2005: Corn + .9% Beans -2.8% Wheat -2.7%

  9. Earn the Market Carry 1. Store and forward contract 2. Store and sell futures 3. Store and speculate

  10. Corn Price Strategies • Harvest cash prices $1.65 to $1.80 • LDP’s working-review FSA forms and mechanics • Today’s LDP is on yesterday’s Posted County Price (PCP) • 60 day repayment lock-in provisions (CCC-697) • Consider early LDP’s of $.35 to $.50 per bushel • Great returns to on-farm storage and some on Commercial: • 32 to 35 cents to late-March • 36 to 40 cents into early-summer • Late-spring or early-summer $1.95 to $2.10 • LDP, store, and earn the carry: • LDP, store, and forward contract • LDP, store, and sell May or July futures (hedge) • LDP, store, and speculate on price rise • Do some of the first two on a sizable portion. • Fewer corn acres in 2006, but better yields modest price improvement.

  11. Soybean Pricing Strategies • Harvest cash prices: $5.40 to $5.60 • Post-harvest recovery back to $5.80 to $6.00 (by Thanksgiving) • Flat-to-modestly higher in Jan, Feb. March with normal South American harvest?? Highs maybe $6.10 to $6.20 in late-spring • No LDP’s expected • Gross returns to storage: Store on-farm, maybe commercial • 35 to 38 cents to late-March • 39 to 43 cents to late spring • Strategies: • Store on-farm and speculate until December, then consider forward pricing on hedging. • Consider commercial storage until Thanksgiving time. -Speculate for higher prices: Last four years cash increase has been: - 2001 Crop = +$1.50/ bu. - 2002 Crop = +$1.25+ - 2003 Crop = +$3.00/bu. -2004 Crop = +$2.20/bu. • With limited storage space, the Market favors corn storage over bean storage. • More acres in 2006, higher yields, lower prices???? Not if S. America is Normal

  12. Estimated Production Costs

  13. Animal Industries

  14. Cattle Supply & Prices Finished Steers 450 - 500 Heifer Calves 500-550 Steer Calves Feeder Steers

  15. For 2006: Cow numbers + .5% Milk per cow +1.8% Production +2.3% Milk prices lower, feed similar prices

  16. Moderate farrowings

  17. Average Land: $2,945 up 9.4% Cash Rent: $126 Up 3.3% Outlook 2006: Land….up 4% to 6% Rents…up .5% to 1%

  18. What’s Driving Land Values/Rents?

  19. Monday-Katrina Tuesday-Flooding Impact on Ohio River Corn Basis: -20 to -25 cents/bushel

  20. Kokomo Corn Basis Impact: -4 to -6 cents/bushel

  21. N.E. Indiana Corn Basis Impact: -2 to -3 cents/bushel

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