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Source: Univ of Illinois news release

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Last week, the U.S. Department of Agriculture (USDA) released its baseline projections providing ten-year estimates of supply and demand factors impacting U.S. agriculture. These projections suggest long-run prices of $3.55 per bushel for corn, $9.80 per bushel for soybeans, and $5.10 per bushel for wheat. While these prices are reasonable for long-run budgeting exercises, we also suggest using lower prices of $3.40 for corn, $9.00 for soybeans, and $4.80 for wheat. Long-run prices suggest that soybeans will continue to be more profitable than corn into the foreseeable future.

Annually, the U.S. Department of Agriculture (USDA) produces ten-year baseline projections for crops and livestock grown in the United States (see Baseline Projections). For each crop, supply and demand factors are estimated, along with yearly estimates of market year average (MYA) prices for the U.S. Final projections are typically released in February near the time of USDA's annual Agricultural Outlet Forum. An archived of historical projections is available here.

In November, USDA provided an early release of their 2020-2030 baseline projection. This early baseline allows assessment of price levels after a tumultuous year when many supply and demand factors were impacted by COVID-19 as well as a host of other supply and demand factors.

In this article, we will make comparisons of the February 2020 projections to the latest November 2020 projections. Importantly, February 2020 projections were released before COVID-19 control measures were in place. New November projections consider COVID-19 controls measures, changes in export and other demand outlooks, as well as relatively full information about 2020 U.S. production. November projections will provide useful information in making long-run forecasts of prices.

Corn, soybean, and wheat forecasts are shown in the following sections. Historical prices from 2000 to 2019 also are shown to provide background. Average prices are calculated from 2013 to 2019 as references for forecasts. Much of the increased use of corn in ethanol occurred by 2013. Thus the 2013-2019 period was judged as a reasonably stable demand period. Historical prices from 2000 to 2019 were obtained from Quick Stats, a website maintained by the National Agricultural Statistical Service (NASS), an agency of the U.S. Department of Agriculture.

Corn Prices
The 2013-2019 average price for corn is $3.67 per bushel (see Figure 1). The 2019 MYA price of $3.56 is below the 2013-2019 average price. The February forecast had projected prices of $3.40 for the 2020 marketing year, with prices rising to $3.60 in 2029. All of these forecasts were below the $3.67 average price for 2013-2019.

The November forecast has corn prices of $3.60 for 2020, rising to $3.65 in 2021, and then declining to $3.60 in 2022 and 2023, and finally declining to $3.55 for the years of 2024 to 2030. Overall, the November 2020 projections for corn are lower than February 2020 projections for the 2019 marketing year and years after 2026. From 2021 to 2025, the November forecasts are $.05 per bushel higher than the February projections.

Soybean Prices
Soybean prices averaged $9.70 from 2013 to 2019 (see Figure 2). The 2019 MYA price was $8.57, significantly below the 2013-2019 average. The February forecast had soybean prices of $8.85 for 2020, declining to $8.55 in 2021 and 2022, then rising to $9.05 by 2029. All these prices were well below the 2013-2019 average of $9.70.

The November forecast projects much higher soybean prices. For 2020 to 2029, November forecasts are, on average, $1.00 per bushel higher than the February forecast. November projections are $9.80 for 2020 and $10.00 for 2021. Then MYA soybean price projections vary from $9.65 to $9.90 from 2022 to 2030. The November forecasts have an average yearly price of $9.79, $.09 higher than the 2013-2019 average.

Overall, a rebound in exports in 2020 and a continuation of export demand growth leads to a more optimistic price scenario for soybeans. The November projection arrives at prices near the 2013-2019 average of $9.80.

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