PEORIA, Ill. — Is $5 corn a thing of the past? Can a “monster” harvest signal the death knell for the “new era” of ethanol-and-export-fueled post-2006 grain prices enjoyed by farmers?

These were questions pondered by John Newton, an assistant professor in the University of Illinois Department of Agricultural and Consumer Sciences (ACES), during his presentation at the 2014 U of I Farm Economics Summit in Peoria.

“What is a monster crop? In Illinois we are well above the U.S. average in soybean yield. We’re looking at 56 bushels per acre in the November 2014 (USDA) estimate. For corn, the state of Illinois November estimate is about 200 bushels per acre. That’s a monster crop,” Newton told the 100 or so farmers gathered for the Dec. 16 summit at the Peoria Civic Center.

“But what are the implications of a monster crop on grain prices?”

History has already answered that question time and again, and rarely as dramatically as during 2014 when prices for corn plunged to below $3 a bushel in some parts of the country.

Whether the decline in corn and soybean prices continues holds important implications for farm incomes, land prices, crop input prices, land rental rates and marketing strategies, according to Newton and his ACES colleagues, professor Scott Irwin and professor emeritus Darrel Good, also in attendance.

Good argued that in 2008 and 2009 corn, soybean and wheat had ascended to a new era of higher prices, retroactive to around December 2006. ACES’ five-year, new era projections for the price of corn ($4.60), soybeans ($11.04) and wheat ($5.80) in 2008 held up remarkably well.

But now the new era appears to be in the rearview mirror, can producers ever expect a return to at least “normal” grain prices?

“The likelihood of having higher corn and soybean (price)s in the future remains,” Newton said. “The evidence that the new era of grain prices is over is not there. We can have some low prices, but we’re going to go back to (ACES-projected) prices. Even though we’ve had a monster crop, we’ve not stepped back to that old (pre-2006) era of prices.”

There are reasons for farmers to remain optimistic grain prices will return to profitable levels, he reported. First, the nation’s Renewable Fuel Standard (RFS) acts as a safety net on corn prices by using millions of acres of corn for ethanol. Second, Chinese demand for U.S. soybeans is expected to remain extremely strong.

“The Chinese are bringing in over 3 billion bushels per year, and that’s equivalent to 60 million acres of production – or about 70 percent of our U.S. soybean acres,” said Newton. “And there is a zero chance the RFS is repealed by Congress. So that remains a strong safety net for corn prices.”

The lesson, he said, is that not all harvests can be of the monster variety that push production above trend-line yields and send prices plunging, mainly due to the vagaries of the weather. “We can have a sub-par trend line yields in a sub-par weather year. Things can change,” he said.

“With the corn and soybean production safety nets, soybean export demand from China and changes in the weather, there are three good reasons for optimism. Those are reasons why I am optimistic that we can see corn prices above Darrel’s conservative estimate of $4.60. Last night at dinner he said $4.75, but I don’t know if I can quote him on that.”

When Good voiced his assent from across the room, Newton followed with, “Now that’s optimism,” and encouraged producers to maintain “new era expectations” for crop prices into the immediate future.

“We had 35 months above the new era average for corn prices, but that doesn’t necessarily mean we’re going to go into a 30-month period of below-average prices. We have reasons to believe the duration may not be that long.

“If you look at it historically, we don’t see a long period of above-average prices followed by a long period of below-average prices, and it’s the same way with soybeans,” Newton concluded. “We will go back to that new era of crop prices; it’s just a matter of when.”

For more detailed information about Newton’s presentation – his first public speech with ACES – visit www.farmdoc. illinois.edu/presentations/IFES_2014