Hurt says 2011 could be peak year in price hikes for crops

Authored by Jim Langham on Dec 12, 2011

Dr. Chris Hurt used the word, "modification," to describe the upcoming changes in crop prices.
"We've climbed to the mountaintop. We're going to go over the top and start down, but we're going to have a smooth landing," said Hurt at the annual Purdue Extension projection supper.
"The reason why we believe that it is going to be a smooth landing is because we tend to believe that big demand growth is not going away. There is still going to be the demand to raise corn for ethanol and the sale of beans to China. The things that drove up the prices are not going to be pushing the upward pressure as much. Over the next few years, the supply is going to catch up. Over the last five years, the demand drove prices faster than the supply."
Hurt said that those working with him expect to see some moderation with the Chicago Board of Trade. He noted that ethanol and soybean demand are still expected to grow over time, but not as quickly.
"The European economy really has the futures scared," said Hurt. "We expect to still see a slow growing economy in the United States. As Europe gets weak, it strengthens the dollar, but it weakens the commodity prices."
Factors still shaping the U.S. economy in the next few years will continue to be a drop in corn use for ethanol, decrease in sale of soybeans to China, and continuation of extreme drought across the southern portion of the country stretching from lower California to Virginia.
"Extended drought, with Texas having its driest period in a century, will create higher prices for crops elsewhere, with mild weather improvements in the middle and upper Midwest," said Hurt.
Hurt predicted that Purdue analysts currently predict that of 1.4 to 2.4 percent economic growth in 2012, unemployment no lower of 8.5 percent and a consumer price index of 2.5 to 3.5 percentage higher.
"The good news for the future is the inclusion of fuel from farms, which refers to corn-based ethanol," said Hurt. "The bad news is the weak dollar and the slowness of overall national economic recovery."
Hurt noted that corn prices could still average in the $6.45 range in the United States in 2012 and as high as $5.65 per bushel in 2013. Soybeans could maintain prices of $12.60 per bushel in 2012 and $11.50 per bushel the following year.
"Land value could continue to climb in average," Hurt said. "Land values could increase to $6,500 to $7,000 per acre in the Midwest, still up from the current prices of $5,700 to $6,500. Land prices have risen eight to 10 percent since June."
Hurt said that one thing to continue watching is the anticipation of more acreage and crops in South America. He noted that foreign buyers are all watching to see what happens in South America.

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