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‘It’s a supply and demand issue’: Price of corn less than half what it was 1 year ago

MITCHELL, S.D. — It’s been two years since a devastating drought withered crops in the U.S. and sent the price of corn skyrocketing.

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Now, U.S. farmers, including those in South Dakota, are preparing to harvest what is expected to be a massive corn crop for the second year in a row, even as the price of corn has tumbled to a level far below where it was a year ago.

Saturday, the cash price of corn at the CHS Farmers Alliance elevator in Mitchell was $3.23 per bushel. That’s less than half the price from the same day a year ago, when the price of corn was $6.89 per bushel.

Kim Dillivan, a crops business management field specialist at South Dakota State University Extension’s Aberdeen Regional Center, said the price of corn has declined because farmers built up the drought-stricken supply with a huge crop last year, and are expected to do it again this year.

“That fall-off in supply really caused prices to go up,” Dillivan said. “Now we’re getting back to more normal conditions.”

A record 13.9 billion bushels of corn was harvested in the U.S. in 2013, according to the U.S. Department of Agriculture’s National Agricultural Statistics Service. An estimate released recently by NASS forecasts nationwide corn production to match or exceed last year’s record, Dillivan said.

“Really, we’re just looking at really good production,” he said.

South Dakota’s farmers produced nearly 812 million bushels of corn in 2013, a record amount and an increase of 51 percent from 2012, according to NASS. This year, the state’s farmers are expected to produce about 781 million bushels, about 31 million bushels less than in 2013. Still, it would be the second largest crop in the state since 2009.

“We’re not in the bin, but things look pretty doggone good,” said Brian Maas, branch manager at CHS Farmers Alliance elevator in Mitchell.

With old corn from last year’s crop still moving and another sizable crop expected this fall, Maas said it’s no wonder prices have declined.

“It’s a supply and demand issue,” he said.

Maas said farmers this year may try to wait out the low prices by holding on to much of this year’s crop.

“They won’t move any more than they have to at these prices,” he said.

Dillivan said the lower prices will mean thinner profit margins for farmers this year, even as the costs required to produce a crop continue to rise.

“It means less of a gap between their revenue per acre and their cost per acre,” he said.