No Beans in the Teens Anytime Soon

Posted: January 17, 2019

Expect soybean prices to average around $9 and corn to be under $4 this year, says Scott Irwin, University of Illinois ag economist.

Irwin’s analysis shows the best times of the current price era could be in the rearview mirror, although chances of a rally always exist in such a cyclical and weather-dependent business.

Prices during the first eight years of the current price era (2007-13) averaged $4.90 for corn and $11.73 for beans, but since that time averages from 2014-18 slipped to $3.57 for corn and $9.75 for beans.

Scott Irwin

Irwin’s research, combined with that of retired U of I ag economist Darrel Good, shows a pattern. Each of the last three new eras in crop prices was triggered by a demand-driven “boom period” when prices skyrocketed. That period lasted between four to eight years.

Each time investments in the ag industry and farm production increased, along with the cost structure, during the boom period, which created an oversupply situation that pressures prices for years at a time. Irwin believes the farm sector reached that phase in recent years.

Looking ahead, he predicts price averages around $3.75 per bushel for corn (with a range of $2.90 to $5.50) and $9 for beans (with a range of $7-$13). One of the only ways to achieve the high end of those ranges anytime soon would be some type of supply shock, such as a drought.

“I think we’re in the second phase (of the new price era) where nominal prices have pressure to fall,” Irwin said. “But we are going to have droughts in the future. When that happens, we will get higher prices.”

Source: Illinois Farm Bureau