commodity prices

The record-setting corn and soybean crops forecast by USDA — the latest in a string of bumper crops — will drive down commodity prices and put pressure on growers to cut their costs, says economist Gary Schnitkey of U-Illinois. Midwestern growers will lose money at current rental rates, says Schnitkey, and will not break even until rates drop by $50 an acre, or roughly one-fifth.

It's been a decade since low commodity prices made loan-deficiency payments a routine, if arcane, part of U.S. agriculture. But prices are low enough that wheat growers are collecting LDPs and the payments "might even be on the cusp of returning for corn in some parts of the country," says DTN. When farmers request an LDP, the USDA pays them the difference between the support price for a crop and the market price, when prices are below the so-called loan rate.

U.S. corn plantings grew 10 percent in the past decade, driven by the commodity boom that began in 2006. Economist Gary Schnitkey says the expansion occurred mostly in the western Corn Belt, with North Dakota and South Dakota accounting for one-third of the increased U.S. acreage of 7.9 million acres.

High corn and soybean yields will bring bumper crops, traders said in anticipation of the USDA Crop Production and WASDE reports to be issued today. In surveys by Bloomberg and Reuters, analysts said the fall harvest will be bigger than thought a month ago, which will fatten U.S. inventories and hold down commodity prices for months to come.

Surging grain, sugar, meat and dairy prices worldwide drove up the FAO Food Price Index 4.2 percent, the steepest one-month increase in the index in four years. June was the fifth month in a row for an increase in the index, which tracks the average international price of a basket of food commodities, now at its highest reading since last July.

The USDA calculates that farm income fell 38 percent nationwide last year. For some of the nation's leading farm states, the drop was the largest in decades, such as the 80 percent drop in Nebraska, says Harvest Public Media.

If USDA agrees with analysts, its monthly crop report will say U.S. farmers are growing slightly more wheat and soybeans and marginally less corn than previously thought. One thing would not change in the report, due today at noon ET: a slump in commodity prices that began in 2014 is forecast to persist for years to come.

Chickpea prices have soared 44 percent in the past year to reach an all-time high in India, says Agrimoney. India is the world's largest consumer of chickpeas but the pulse is in short supply because of drought.

Corn, soybean and wheat growers would receive significant payments — as high as $80 an acre for corn — under the insurance-like Agriculture Risk Coverage subsidy based on the low commodity prices now forecast, says Ohio State economist Carl Zulauf.

Cash rental rates for corn and soybean land in Iowa are down a cumulative 14.7 percent since 2013, according to a survey by Iowa State University. The average rate for this year, $230 an acre, is down 6.5 percent from last year's $246 an acre.

"There's a lot of doom and gloom in the air about the state of the farm economy," says a report by the Environmental Working Group, and much of it is a campaign for larger crop subsidies. "The farm subsidy lobby has been working overtime to sue what it calls a 'farm crisis' to deflect well-deserved criticism of the fatally flawed federal subsidy program that they're desperate to protect."

Grain elevators "are in for a difficult 2016/17 season," says agricultural lender CoBank, pointing to demands for more storage space while prospects darken for revenue from grain merchandising and grain drying.