Grain prices could hit bottom next year

Already suffering grain prices could reach a long-term low next year, says ProAg following the release of the United States Department of Agriculture’s long range projections.

The projections, which were released Feb. 16, note the strength of the dollar and competition from foreign nations as root issues in the marketplace.

“Through the 2016-17 marketing year, food and feed grains prices have continued to drop from the highs of recent years as U.S. and global supplies reached new heights,” according to the report. “Marketing year 2017-18 projections suggest the end of the price declines and the beginning of modest increases that are expected to continue through 2026. Despite the expected price increases over the next 10 years, prices are projected to remain lower than those seen over the past decade, leading to lower returns and reduced plantings."

The report also highlights the decreased cost of production following the drop in crude oil prices, but is quick to point out that any real benefit for agricultural producers is lost as prices for most crops have fallen globally. The prices are expected to stop falling and a slow but steady increase is expected through 2026.

“Over the next several years, the agricultural sector will continue to adjust to lower prices for most farm commodities and reduced energy prices,” the report said. “Reduced prices for crude oil and natural gas have decreased agricultural production costs—costs for fertilizer and for fuel, lube, and electricity have fallen the most. Nonetheless, production response to lower crop prices in the near term will result in reduced planted acreage. In the livestock sector, lower feed costs will provide economic incentives for expansion.”