Minnesota Farmer


Crop prices decline, now what?

Prices for corn and soybeans have changed dramatically in the past few years.  Lately they are on a down hill slide.  Where only a year ago we were talking record prices, today Ag. Bankers are wondering how long corn belt farmers can hold on.  We’ve been through this before in my lifetime, and farmers will survive, but it will change them.  How it will change them is yet to be determined.

I was looking for a more recent graph of corn prices, but this will do with some added information.Inflation_Adjusted_Corn_PriceBack when I started farming, I remember corn being worth about $1.25 per bushel or about $56 per metric ton.  I’m not sure exactly what that would be with the inflation adjustment, but it was enough to keep us going.  of course we only raised about 100 bushels per acre then.  Back in 1970 a cup of coffee cost a nickel or $1.90 per pound, frozen veggies were 25 cents per pound, potatoes were 9 cents per pound, sugar 39 cents for 5 pounds and a loaf of bread was 16 cents.  Oil was under $1 per barrel and gas went for 36 cents per gallon.

The earliest corn price records I can find for our area are from November 1993.  The price then was $2.50 per bushel or about $112 per metric ton.  By then frozen veggies were about $1 per pound, potatoes were 31 cents per pound and sugar was 99 cents for 5 pounds.  In 1990 oil went from $17 per barrel to $39 per barrel and gas averaged $1.16 per gallon.

Back in the 1990’s we had too much corn on the farm, and that had been a fact since before 1980.  Our government was doing everything it could to “manage” corn prices to keep people on the farm.  They were not succeeding.  Farmers were paid to keep some land out of production and prices were at or below break even prices for many in agriculture.  Farmers were looking for new uses for their crops and industry was taking advantage of an inexpensive feed stock.  The future was gloomy on the farm.  Young ambitious people left the farm for city life.

Then comes 2011.  Drought strikes.  By November of 2011 corn and soybean prices are on the rise.  End users are paying Chicago prices or higher to get their hands on a corn crop that was not there.  A newly industrial China is looking to feed her people and is paying well over U.S. prices.  November 18 corn is at $6.10 per bushel or about 275 per metric ton.

In 2012 there are more weather problems and corn prices continue to rise.  By November 9 we have corn at $7.38 per bushel or $332 per metric ton.  China is still buying U.S. corn and soybeans despite historically high prices.  Farmers are paying off bills and buying land.  Farm land rents skyrocket as dollars flow to the corn belt.  Despite the rising cost of many oil dependent inputs like fertilizer, insecticides and herbicides it is easy to pay the bills.  The midwest corn belt had many weather related problems, but still produced a near record corn crop and farmers have bushels to sell.  Life is good on the farm.

Today things have changed.  Every crop price projection is lower that the last.  In November of 2013 corn prices are down to $4.26 per bushel or about $193 per metric ton.  Some crop price projections are signaling even lower prices to come, adjusted for inflation, we could soon be seeing some of the lowest prices for corn in my 60 years.  The national average corn yield is at 158 bushels per acre and my area is doing better than that.  Farmers, remembering the prices of only a year ago, are reluctant to sell, but buyers are getting plenty of corn and soybeans on the world market and are reluctant to push prices higher.  So much demand was lost to the high prices of the last few years that the market is unsure, and higher stock piles of corn and soybeans do not allow for price increases.  High costs that were easy to survive when corn was over $7 are now a major burden.

Changes are coming.  Banks are already cautioning higher cost farmers to look ahead.  Some will surely go bankrupt.  Who will survive?  If history from the 1980’s is any guide, it will be the thrifty.  There will be farmers both large and small who will work their way through the coming hard times.  Mostly it will be those who can keep costs down and somehow manage to sell their crops for more.  Corn and soybean growers who cannot produce better than average yields will look for other crops to plant, or sell out to those who can.

Having off farm income will be key for smaller farmers.  Wives will again hold the farm together as their income becomes more important to feed the family.  Off season truck driving or factory jobs will help to pay farm bills.  Good times will return, but for now, it is going to be hard to make a living on the farm.

Modern technology is also going to be key to future profitability.  Wasting less and squeezing more out of every input will be easier with the newest machinery, but those who are able to afford new iron will be fewer, and farms will get bigger.  Corn and soybeans varieties that are top yielders, that are the most efficient, will rise to the challenge.  Farmers will embrace any new idea they can to stay in the farming game.

No one ever said that farming was easy.  With tough times ahead, it’s time to sharpen that pencil and fire up the computer.  The world needs our food, and we will be there to serve them.  There may just be a few less of us to feed them.

Michael

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