URBANA – A veteran commodity market analyst said he thinks both corn and soybean prices have peaked for the year – unless central Illinois gets a drought this summer.
Jim Gill, president of MarketVal Enterprises, a commodity marketing advisory service, told farmers at the 96th annual Champaign County Farm Bureau meeting Monday that certain market trends mean grain prices could tail off in 2008.
Gill is a former director of commodities for the Illinois Farm Bureau.
While the U.S. Department of Agriculture officially projects higher prices for both commodities over the next two years, Gill told Farm Bureau members he sees trends they both could actually decline.
"Corn and soybean prices have peaked for the winter and possibly for the whole year," Gill said. "We have seen some highs that we haven't seen for a number of years."
Pesotum farmer and Farm Bureau member Melvin Schroeder said Gill's talk gave him insight to make his planting plans for 2008.
"It's important to understand the market trends before a farmer makes planting decisions," Schroeder said.
Gill told the farmers that increased demand helped boost corn prices over the past year.
"This has been a marvelous corn market," Gill said. "It doesn't hurt that, every week or two, we open up a new ethanol plant, so the demand gradually increases."
But Gill said he thinks corn prices are as high they are going to be, depending on the weather.
"We're at a level where corn prices are going to struggle to go any farther," Gill said. "The high prices we have seen over the last couple of weeks may be it for the winter."
Gill said China has increased its demand for beans while India has boosted its demand for vegetable oil, forcing bean prices above $10 a bushel.
The demand from China and India means the U.S. will likely need to boost its soybean acreage from 63.6 million this past year to 74.2 million during the upcoming growing season.
About 4 million acres of that will come from land used for corn in 2007.
In addition, as much as 2 million acres may be used for double-cropped beans.
"Corn is still the most profitable, but it doesn't have the edge over soybeans and wheat that it had last year because fertilizer prices have skyrocketed," Gill said.
But the pressure for more soybean acreage may influence the government to ease restrictions to bring acreage from the Conservation Reserve Program back into production.
"I would suggest that the rules will be changed next year if the prices are anywhere near to what they are now, and that will be the end of the bull market," Gill said.