How Crop Prices Will Affect Markets

How Crop Prices Will Affect Markets. I’m Greg Martin with today’s Line On Agriculture.

We all watch food prices at the grocery store going up and down but Joe Glauber, USDA Chief Economist says that due to the drought and related crop reductions you can expect changes in a lot of areas.

GLAUBER: Higher prices will cause some changes. We’ve seen that in ethanol production. The weekly numbers have certainly been down and we’re anticipating some pretty large numbers to come off on ethanol for next year, lowering that. Really over the last 2 months we’ve lowered that a half billion bushels for corn use for ethanol. Exports we’ve lowered 600 million bushels. I mean those are very striking numbers.

Glauber says it will be very difficult to analyze with so many different variables.

GLAUBER: It’s hard to talk about something 12 months off as we’re trying to sort through this one now. We’ll have to look at the revenues and obviously we’ve seen enormous price increases. We know that there will be some crop insurance receipts that should help. I think on the crop side, that side of the ledger should look ok.

Of course for livestock producers, Glauber says that there will be huge increases on the feed cost side through most of next year.

GLAUBER: The real incredible thing to me is we’ve taken 4 billion bushels off this crop. Just phenomenal and we keep talking about 1995-96 because the crop yield is near that level. The ending stocks look like they’re going to be near that level that we saw in 1995 and 96 but this is a crop that is far larger, 10.8 we would have thought was a huge crop only 10 years ago.

And of course you know what the bottom line is going to be.

GLAUBER: The real question is what magnitude and when does it really hit the consumer.

We will probably see some lowering of prices for a short time while producers send more livestock and poultry to the markets to help in cutting feed costs. This glut will drive down prices for a short time until supplies once again get tight.

That’s today’s Line On Agriculture. I’m Greg Martin on the Ag Information Network.