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Department of Agricultural, Environmental, and Development Economics

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OSU Economist: Stagnant Demand, Ample Stocks Could Keep Grain Prices Flat in 2016

Dec. 15, 2015

This article was originally posted on the Ag Answers website.

By Tracy Turner | 12/9/2015

 

COLUMBUS, Ohio – Grain prices aren’t likely to rise next year because of stagnant demand growth and ample grain supplies, says an agricultural economist with the College of Food, Agricultural, and Environmental Sciences at The Ohio State University.

With the slowing Chinese economy contributing to stagnant demand growth and the ample supply resulting from large harvests in major production nations the past two years, along with destocking in Argentina and China, the 2016 grain market will remain one of flat, weak prices, said Matt Roberts, an Ohio State University Extension economist. OSU Extension is the outreach arm of the college.

“The global and U.S. wheat market remains well supplied,” he said. “To date, Great Plains weather has been positive for the 2016 winter wheat crop, and globally, U.S. wheat is struggling to find export sales against Black Sea wheat.”

Ag policy and outlook series

Roberts spoke Dec. 7 during the kickoff of the college’s 2015-2016 Agricultural Policy and Outlook series. The event featured presentations by experts from the college’s Department of Agricultural, Environmental, and Development Economics, who discussed issues the food and agricultural community should expect in 2016, including policy changes and market behavior with respect to farm, food and energy resources, and the environment.

Due to multiple factors, grain markets will continue to reflect excess supply and depressed prices, Roberts said.

Corn ear“U.S. prices for corn remain weak on the back of two record harvests,” he said. “Combined with good to excellent yields in major growing nations, global corn and feed grain supplies are quite large.

“Meanwhile, demand is weak.”

Roberts said that growers could continue to see corn at $3.50 to $4 per bushel, $8-$9 soybeans and $5 for wheat as the norm, “until prices are low enough to drive acres from production or demand growth from developing countries soaks up the expanded acreage from recent years.

“Uncertainty about China’s plan to reduce domestic corn stocks means that not only will China not import corn in 2016, but may actually be an exporter,” he said. “Worries about China’s economy have also kept a lid on Chinese import demand for soy.

“While soybean imports remain solid, another year of explosive growth in soybean imports doesn’t appear to be in the cards.”

There are ways that farmers can prepare for the impact of these lower prices, Roberts said.

“Farmers should build working capital, pay taxes, lower your land costs, fix your interest rates and bank some cash if you can,” he said. “No, this isn’t a happy message, but this is the reality now.”

County meetings

The kickoff event initiated a series of county meetings to be held statewide through the end of the year. The county meetings, which are open to the public, will be held on the following dates:

* Dec. 16, 4 p.m., at the Attica Fairgrounds Social Hall, 15131 E. Township Road 12 in Attica. RSVP: Jon Ewald, jewald@suttonbank.com or 800-422-3641 FREE, or register online at suttonbank.com by Dec. 9. Cost: free with reservation by Dec. 9; $20 without a reservation.

* Jan. 20, 8:30 a.m., at Der Dutchman, 445 S. Jefferson Ave. in Plain City. RSVP: Union County Extension, 937-644-8117, by Jan. 13. Cost: $10.

* Jan. 20, 4 p.m., at the Bellevue VFW Hall, 6104 U.S. Route 20 in Bellevue. RSVP: Valerie Bumb, BumbV@fnblifetime.com or 419-483-7340, by Jan. 13. Cost: free with reservation; $22 without a reservation.

* Jan. 22, 9:30 a.m., in Fisher Auditorium at the Ohio Agricultural Research and Development Center, 1680 Madison Ave. in Wooster. RSVP: Wayne County Extension, lewandowski.11@osu.edu or 330-264-8722, by Jan. 15. Cost: $15.

* Feb. 15, 7:30 a.m., at the Trinity Lutheran Church, Noecker Hall, 135 East Mound St. in Circleville. RSVP: Pickaway County Extension, 740-474-7534, by Feb. 8. Cost: $10.

* Feb. 19, noon, at Romer’s Party Room, 118 East Main St. in Greenville. RSVP: Darke County Extension, custer.2@osu.edu or 937-548-5215, by Feb. 12. Cost: $20.

* Feb. 24, 6 p.m., at the Jewell Community Center, 7900 Independence Road in Defiance. RSVP: Defiance County Extension, clevenger.10@osu.edu or 419-782-4771, by Feb. 19. Cost: $15 in advance or $30 at the door.

A meal is provided at each meeting and is included in the registration cost. Questions can be directed to the local hosts noted above.