The days of record high corn prices are gone, at least for now, and they’re only going to continue their decline, according to projections released this week by the U.S. Department of Agriculture. (PDF)
You can pin part of the blame on the 2012 drought, when corn hit an all-time high of $8.31 per bushel. The dry conditions made corn a limited commodity.
“What that does is it very aggressively drives up price, and then over time as you have more normal weather and you have producers responding to those price incentives you have the prices come back down,” said Steve Koontz, an economist at Colorado State University.
The next year, 2013, farmers rushed to plant as much as they could to take advantage of the high price. When growers stowed the combines away, the 2013 harvest, as expected, was one for the record books.
Now, the USDA projects corn could dip below $4 per bushel for the new two growing seasons and then begin a slow climb upward after 2016.
There is a lesson in the 2012 drought, Koontz said. Farmers and economists couldn’t predict the ballooning corn price, nor the dry conditions that spurred it to rise. Because it’s a weather-dependent industry, Koontz says take these latest projections with a grain of salt.
“I applaud the USDA for these long term projections, but without a doubt they’re going to be wrong,” Koontz said.
That means another wild card like a drought, or flood, and prices could climb again.