Want to know how Purdue ag economist Chris Hurt gets people's attention these days? He shows them a PowerPoint slide with an expected soybean production cost of $12 per bushel with an expected price of $11 a bushel. And another slide showing $5 per bushel corn costs with expected $4.50 per bushel prices.
That'll get someone's attention real fast.
As ample Midwest rains drive predictions of another bumper crop, Hurt was offering an outlook that may seem a bit daunting, at least in the short term. "We're building world inventories of grain," he says. "Corn world stocks to use figures are drifting to 18%, the same level as in 2010; by comparison, when we had $2 corn we had 28% supplies of world corn stocks to use.
"Soybean numbers are even higher - right now we're looking at 29% world stocks to use based on May 2014 USDA numbers."
As of last week, Iowa, Minnesota, South Dakota, Illinois, Indiana then Nebraska – the six largest corn states – had corn ratings of good or excellent, ranging from 84% to 66%. Overall, the U.S. corn crop is rated 76% good or excellent. That's the fourth best crop rating in history this far into the growing season.
"Right now this has the prospective of being a darn good crop, with low prices," Hurt says.
All this data is being plugged into the crop models at Purdue University, and it's spitting back a potential record 168.3 bu. per acre national average.
"We know this can change a lot," Hurt adds, "but the futures market will make that call about two weeks before pollination. We'll know by the third week of July.
"If we get that 168 bu. yield or even close to it, we'll have two record corn crops in a row and that can doom prices," he adds. "We've got quite a lot of downside vulnerability."
With the heat wave we're experiencing now it means there may be some weather stress coming," Hurt adds. "If not, you could see corn coming out of the field at $3.80/bu."
Meanwhile this soybean crop is rated the second best in 30 years, based on USDA surveys. Today's ratings don't determine yield; we'll know that in late July and August. But soybeans could come in with record production, based on high yields and high acreage.
Hurt's farm price range for 2014-2015 is $10 to $12 per bushel.