Economic downturn yields decrease in area crop prices
URBANA – Uncertainties caused by the nation's recent economic downturn have begun to cause corn and soybean prices to fall in the United States, according to a University of Illinois marketing specialist.
Darrel Good said the current meltdown of the U.S. credit markets, combined with a sharp decline in stock prices, falling housing prices and increased unemployment rates have hurt ag commodity prices.
"The unknowns are how severe the downturn will be and how long it is going to last," Good said.
Good noted that corn and soybean prices have been sliding since their peaks early this summer, with sharper price declines over the last two weeks.
He said December 2008 corn futures have declined $3.60 a bushel, and November 2008 soybean futures have fallen nearly $7 a bushel.
According to Good, as the economic slowdown becomes more widespread, demand for meat and livestock feed is likely to decrease, leading to additional falling prices.
Meanwhile, the economic downturn has decreased demand for crude oil, causing the price of unleaded gasoline to fall.
"The economic slowdown means potentially lower energy prices," Good said. "As the prices of ethanol go lower, corn means less to ethanol producers. We have been through a period of robust demand that appears to have come to an end. The question is how soft it will get."
Champaign County Farm Bureau Manager Brad Uken said area farmers are concerned about the falling prices.
"We have seen a downturn in the corn and soybean markets over the last week or so," Uken said. "When the financial crisis hit on Wall Street, it also affected people who invested in commodities. They started to sell their positions in the commodity markets. That's part of the reason why we have seen a downtown in the market."
According to the U.S. Department of Agriculture, inventories of soybeans reached 205 million bushels on Sept. 1, about 55 million more than previously expected.
Corn inventories were estimated at 1.6 billion bushels on Sept. 1, about 48 million more than expected.
In addition, exports of U.S. crops are below expectations. While the USDA projected exports to decline by 17.5 percent, actual exports of commodities are 37 percent less than in 2007.