Corn Prices May Decline in Next Decade on Yields, CBO Says

Corn prices that averaged $6 a bushel last year are headed for a decline as production in the U.S., the world’s top grower and exporter, catches up with demand, according to congressional analysts.

The average cash price will fall to $4.54 in the 2013 marketing year beginning Sept. 1, then rise to $4.82 by 2022, the analysts from the Congressional Budget Office said today in a document used as part of a government-wide estimate of federal spending during the next decade. Corn futures closed yesterday at $6.3175 a bushel on the Chicago Board of Trade.

U.S. net-farm income may have risen 28 percent to a record $100.9 billion in 2011 as livestock sales expanded and exports pushed crop prices higher, the Department of Agriculture said in November. Trade that reached a record $137.4 billion in the year ended Sept. 30 may fall to $132 billion this year, the USDA said. Slowing growth will keep corn-ethanol consumption at 5 billion bushels this year, unchanged from last year and down from 5.021 billion in 2010, according to CBO data.

Slower growth in the use of corn for ethanol is “giving trend corn production a chance to catch up and surpass demand growth,” Keith Collins, a former U.S. Department of Agriculture chief economist, said in an e-mail. Yield gains may not keep pace with CBO predictions, and year-to-year variations in supply and demand may be greater than forecast, Collin said.

Lower Wheat Prices

Wheat, soybean and cotton prices paid to farmers by 2022 will also be lower than last year, according to the nonpartisan CBO. The report doesn’t estimate high or low prices for the year, only averages.

Corn prices are expected to stay low even as total use rises 14 percent to 15.198 billion bushels by 2022. The analysts forecast production increasing 8.6 percent to 15.19 billion bushels, as a 12 percent gain in yields absorbs a 42 percent jump in exports to 2.63 billion bushels and an 8.5 percent gain in ethanol use to 5.425 billion bushels by 2022.

Corn is the biggest U.S. crop, valued at a $66.7 billion in 2011, followed by soybeans at $38.9 billion.

Soybean Forecast

Soybeans will average $11 a bushel this year, then fall to $10.46 next year before rising to a new peak of $11.05 in 2022. Planted acreage will range from 75.2 million to 77 million acres over the next 10 years, the CBO analysts said.

The average wheat price is forecast to rise from $6.05 a bushel this year to $6.14 in 2022, dropping to a low of $5.63 next year. Production, seen at 2.152 billion bushels this year, will range between 2.06 billion bushels in 2014 to 2.173 billion bushels in 2022, as yields rise 7.7 percent to 48.7 bushels per acre over the next decade. Wheat is the fourth-most-valuable U.S. crop, with a 2010 value of $13 billion, following hay.

Upland cotton prices are projected to fall to 70.06 cents a pound in 2013 from 82.42 cents this year, then peak at 71.91 cents in 2019, according to the report. The USDA valued the 2010 cotton crop at $7.3 billion.

The estimates, which include forecasts for crops that receive government subsidies, are separate from the U.S. Department of Agriculture’s annual 10-year baseline forecast for farm production and prices. That report, scheduled for release next month, is used to formulate the White House budget proposal.

Crop subsidies will peak at $9.87 billion in 2014, according to the CBO document.

The average prices cited are based on marketing years. For corn and soybeans, the year begins Sept. 1; wheat’s year starts on June 1 and cotton’s begins on Aug. 1.

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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