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Corn Prices Expected to Improve
USAgNet - 11/07/2018

Farmers rattled by the dip in value of their soybean crop likely will see prices for their corn go up next year, one of the few optimistic projections made at a recent conference on future profits in farming.

Most of the graphs presented at the event hosted by the Department of Agricultural, Environmental, and Development Economics (AEDE) at The Ohio State University offered a grim outlook: a decline in soybean crop prices resembling a steep ski slope, shrinking pie slices representing Chinese demand for U.S. soybeans.

But there were a few bright spots noted at the Agricultural Policy and Outlook Conference, including a projection that corn prices could improve in 2019.

As the world supply of corn shrinks, that will drive up corn prices, said Ben Brown, manager of the farm management program in the College of Food, Agricultural, and Environmental Sciences (CFAES).

The per bushel marketing average price of corn was $3.36 in 2018, and that likely will rise above $3.60 in 2019, Brown said.

Though seemingly a small increase, every 10-cent hike in corn prices results in about $19 more in earnings per acre of corn.

Crop prices for corn and soybeans have plummeted since the summer, but corn prices have begun to rebound, Brown said.

The current low price of U.S. corn spurred exports of the crop beginning in September, Brown said.

"There's some bargain shopping going on with countries including the European Union, Vietnam and Israel," Brown said. "The question is if it will continue."

Another factor could boost corn prices.

Last month President Donald Trump directed the Environmental Protection Agency to begin the process of allowing the year-round sale of E15, gasoline with a higher percentage of corn-based ethanol than standard gas at the pump. Most gas sold in the United States is mixed with 10 percent ethanol; E15 is mixed with 15 percent ethanol.

But Brown said he doesn't expect an immediate increase in the demand for corn as a result of the potential expansion of E15 use because of the time it will take to put the new policy in place.

And while corn prices may increase, corn is still expected to bring lower profits than soybeans next year given the costs associated with planting the crop.

Price projections for soybeans aren't as optimistic as they are for corn. Prices for soybeans, already low, could plunge even further, Brown said.

In June, China, the world's top consumer of soybeans, imposed a 25 percent retaliatory tariff on U.S. soybeans, causing a dip in the world price of soybeans and cutting China's demand for U.S. soybeans.

Chinese companies, which typically buy a significant portion of their soybeans from the United States, now buy more from Brazil, even though the price of American soybeans with the tariff is about the same as Brazilian soybeans, Brown said.

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