Prices Chart of Illinois Corn, Soybean, and Wheat

The New Era of Corn, Soybean, and Wheat Prices
Darrel Good and Scott Irwin
September 2, 2008
MOBR 08-04
“Prices have changed so much for what we sell and buy that it is almost
impossible to feel confident in the decisions you make.”
-- Agriculture Online, July 5, 2008
Prices of corn, soybeans, and wheat started
moving higher in the fall of 2006 and have
remained generally high and well above
average prices in the previous 30 years.
These higher prices, and the volatility
associated with the higher prices, have
resulted in the kind of uncertainty reflected
in the quote above. Are higher prices here
to stay? If so, what is the expected level
and variability of prices during the new era?
From a producer’s standpoint, the question
really is, “What is a good price for corn,
soybeans and wheat?” These questions
cannot be answered with certainty, but
unfolding evidence suggests that prices are
indeed likely establishing a higher average
than that experienced in recent history. The
factors supporting this conclusion include
generally tight world inventories, growing
world demand for food and biofuels, and
escalating costs of production (e.g., Trostle
In this brief, we examine some aspects of
price behavior for corn, soybeans, and
wheat during the pre- and post-January
1973 period and combine that experience
with current market fundaments to generate
expectations about price behavior in the
current era.
Insight regarding the probable magnitude
and variance of prices in this new era can
be provided by the previous shift in nominal
price levels that occurred starting in 1973.
The first period examined is January 1947
through December 1972 and the second is
the period from January 1973 through
November 2006. These periods were
selected because each is thought to
represent a structural shift in market
conditions from the previous period,
resulting in a higher level of nominal prices.
The first period starts immediately after
World War II when price controls were lifted
and the post-war rebuilding effort began.
The second period begins with the changes
brought about by shifts in exchange rate
policies, grain purchases by the former
Soviet Union, and a period of escalating
energy prices and more rapid inflation.
Figures 1 though 3 depict the average
monthly farm price of corn, soybeans, and
wheat, respectively, in Illinois from January
1947 through July 2008. These charts
clearly illustrate the change in the nominal
price levels that occurred in the early 1970’s
and the extreme volatility in prices during
the early years of both periods. The charts
also present the average price for each
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