ARLINGTON, Va. -- U.S. farmers are expected to harvest record corn and soybeans crops in 2013 as growers recover from the worst drought to ravage the industry in decades, a top agricultural economist said on Thursday.
Normal spring weather would bring yields back to their recent averages, Joe Glauber, the U.S. Agriculture Department's chief economist, told an audience of lobbyists, agribusiness executives and other officials near Washington.
He said improved yields would generate a harvest of 14.53 billion bushels of corn and 3.41 billion bushels for soybeans. A year ago farmers overcame bone-dry conditions affecting much of the country to harvest 10.78 billion bushels of corn and just over 3 billion bushels of soybeans.
The recovery should send prices for most oilseeds and grains sharply lower, providing a much-needed reprieve for livestock, dairy and poultry producers struggling with high feed costs and long-term relief for consumers who have paid more for food at their local grocery store, said Glauber.
Corn prices are forecast to average $4.80 per bushel, down a third from the average of the prior year, and $10.50 per bushel for soybeans, a drop of 27 percent. Wheat is seen declining 11 percent to $7 a bushel.
"The critical factor that people will be following is weather," Glauber said at the department's annual outlook forum. "While the outlook for 2013 remains bright, there are many uncertainties."
Glauber acknowledged his forecast is strikingly similar to one he made at this time a year ago. Expectations of a record corn crop and a rebuilding in livestock herds were quickly replaced by record high corn, soybean and wheat prices and a liquidation of animals because of tight margins.
Despite an optimistic outlook from the USDA, weather forecaster have warned that farmers and ranchers in the Midwest and West should brace for another round of hot and dry weather this year. More than half of the United States remains mired in a drought.
Conditions have improved in the eastern Corn Belt states of Ohio, Indiana and Illinois where most areas are no longer being hit by drought. The western Corn Belt, primarily Iowa, remains severely or extremely dry.
"American agriculture is quite resilient," Agriculture Secretary Tom Vilsack told reporters.
Kevin Scott, a farmer from Valley Springs, S.D., said at his operation conditions are dry but improving. "Things are looking pretty good here, but there are going to be challenges," he said.
Scott, who will be planting about 2,400 acres of corn and soybeans, said the storm moving though the country now should help the heavy corn and soybean areas of eastern Iowa, Illinois and Indiana.
"If they get their moisture up we should be in good shape."
The 2012 drought spread beyond the Midwest to affect more than 60 percent of the contiguous United States, making it the worst since the Dust Bowl in the 1930s.
A record corn crop in 2013 should improve ethanol production margins and lead to more output. USDA estimated 4.675 billion bushels of corn going toward producing ethanol, an increase of 175 million bushels from 2012, but down from 2010 and 2011 when more than 5 billion bushels went to produce the fuel. U.S. ethanol producers were forced to scale back output and about a half dozen plants shuttered altogether, taking millions of gallons of ethanol out of production.
Glauber said growth in ethanol will likely be stunted during the next few years by less gasoline consumption, already high penetration rates of the corn-based fuel in motorfuel and fewer opportunity for exports.
Crop and livestock prices are expected to drive consumer prices higher in 2013 but the increase will be smaller compared to levels reached in 2008 and 2011. The U.S. Agriculture Department said food will increase between 3 and 4 percent with the biggest jump coming in the first half of the year as animal-based food products continue to digest higher feed prices. Cereals and bakery products also will see increases above their historical average.
Richard Volpe, an economist with USDA's Economic Research Service, said the evidence of last year's drought is just now starting to really have an impact on consumer prices at the retail level, resulting in higher costs for everything from meat to corn syrup.
As businesses enter into contracts tied to high commodity prices in 2012 and early 2013, they begin to shift those extra expenses to the products they sell. Even if corn and soybean prices fall because of better weather conditions it's unlikely to trickle down and help consumers for some time.
"It's difficult to imagine anybody in the food supply chain permanently absorbing any losses as a result of this drought, which means these higher corn prices and higher soybeans prices are going to filter on to supermarket shelves," he said.
Volpe said the government's food price estimate for 2013 hinges on drought not being a major factor on this year's major field crops. "More than anything . . . this has the potential to change food prices in 2013," he said.
Weather forecasters have warned that agriculture could be in for another hot and dry year. Last week, Roger Pulwarty, a director with the National Oceanic and Atmospheric Administration who focuses on drought, told the Senate Agriculture Committee that "the continuing conditions really look like they're setting up for a very similar level of drought in the Midwest and West" this year.
By Christopher Doering, Gannett Washington Bureau