NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

December 3, 1998

The Market Advisor: Crop Prices for `99 Planning

George Flaskerud, Extension Crops Economist
NDSU Extension Service

Production planning and financial planning require that at least tentative decisions be made about what next year's crops might be worth. Placing a value on next year's crops is difficult to do this far in advance, and next year's weather is anybody's guess.

A reasonable approach to projecting prices is to first build supply and demand tables based on normal weather for the 1999 growing season. Then, derive price estimates for wheat, corn and soybeans at the U.S. level. Using historical price relationships, develop price estimates for crops at the North Dakota level.

Seasonal average farm prices were projected in September for the 1999 marketing year at the U.S. level by the Food and Agricultural Policy Research Institute (FAPRI). They projected prices of $3.10 for wheat, $2.11 for corn and $5.42 for soybeans. Their projections are based on acres decreasing by about 3 percent for wheat, 2 percent for corn and 2 percent for soybeans.

The trade appears to be expecting a greater reduction in wheat acres and additional acres of corn and soybeans. Given a normal basis, Minneapolis spring wheat futures suggest a November price in North Dakota of about $3.50. Chicago futures prices suggest a November price in North Dakota of $2.15 for corn and an October price of $5.60 for soybeans. Futures prices were as of Nov. 30.

Based on these futures prices and adjustments to FAPRI's acreages, I would plan on 1999 fourth quarter prices in North Dakota to average $3.50 for spring wheat, $1.80 for corn and $4.90 for soybeans. Strength in wheat comes from anticipated reductions in the planting of wheat, while increased acres and burdensome stocks will hold down prices for corn and soybeans.

Durum acres are likely to be reduced in response to the small premium for durum over spring wheat. Acreage adjustments will likely bring the premium back to the traditional 50 cents farmers feel they need to grow durum rather than spring wheat. This would imply a $4 price for durum for the fall of 1999.

Historical price relationships suggest North Dakota planning prices of $1.40 for feed barley, $2.00 for malting barley and $1.25 for oats. The projected prices for feed barley and oats are near loan values.

Favorable loan rates will likely cause additional acres of minor oilseeds. Consequently, effective prices for oil sunflowers, canola and flax will likely be near loan values. The 10-year average premium for non-oil sunflowers has been 35 percent more than oil sunflowers.

In the November Supply and Demand Report, USDA projected seasonal average farm prices for the current marketing year of $2.55 to $2.75 for wheat, $1.80 to $2.20 for corn, and $5.15-$5.75 for soybeans. Relative to total use, ending stocks were projected to be about 33 percent for wheat, 19 percent for corn and 14 percent for soybeans.

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Source: George Flaskerud (701) 231-7377

Editor: Dean Hulse (701) 231-6136