U.S. bumper crops equal free-falling prices

No real surprises from the recent WSJ article on the production/price trends facing the major U.S. commodities. Farmers are realizing their second consecutive year of good weather and environmental factors that favor increased production. The USDA forecasts the current corn crop to reach about 13.86 billion bushels, which beggars belief since the estimate is not far off of 2013's record 13.93 billion bushel crop despite 11 percent more acreage devoted to soybeans in 2014. 

In fact, American farmers planted corn on 91.6 million in 2014, 4 percent less than 2013, according to USDA NASS. However, the agency estimates a record 84.8 million acres planted in soybeans, as producers went looking for demand following 2013's robust corn output. Of course, this shift en masse has led to the same kind of downward pressure on soybeans that has afflicted corn. U.S. soybean producers also face stiff competition from Brazil, which saw an 8 percent increase in exports (read China) through May 2014.

As of July 25, 2014, future prices on the Chicago Board of Trade were around $3.63 for the September corn contract and $12.12 for the August soybean contract. With break-even points generally running $4 and $10.00-$11.50 per bushel for corn and soybeans, respectively, the nation's corn farmers "will likely fail to cover their costs for the first time since 2006, according to agricultural economists."

But the slide in corn prices is expected to cut sharply into overall incomes in the U.S. Farm Belt because corn is the country’s largest crop, grown on 350,000 farms and yielding about $60 billion in farmers’ revenue last year.
— "U.S. Corn Farmers Face a Cash Crunch." The Wall Street Journal. 24 July 2014. Web.

One man's loss is another man's gain. Cheap corn will likely buoy the entire meat supply chain through 2016. Expect that topic to be revisited often.