Lower grain prices may change how farmers make their plans

LONDON, Ohio — Farmers appear to be gearing up for the low grain prices and the tighter profit margins that may be ahead.

USDA is forecasting the U.S. average corn yield at 155.3 bushels per acre and prices to range between $4.40 to $5.20 a bushel for corn. NASS has also forecasted the U.S. average soybean yield at 41.2 bushels per acre and a price range of $11.50 to $13.50.

The future

However, those prices could mean even more budget constraints.

Matt Roberts, OSU Extension agricultural economist, said prices could dip below the $4-a-bushel mark for corn in 2014, and could go as low as $3.70, depending on weather conditions and how much is planted in the U.S.

Roberts said he expects corn to hover around $3.75 at harvest time in 2014. Why? There was a lot expansion in corn production when corn was at $6 a bushel, so now the markets have to adjust.

In his long-term outlook, he expects the soybean market to tighten and producers to shift out of corn and into soybeans.

Can you survive

Roberts said he wants producers to consider if they can survive a couple of years of losses.

“I’m encouraging producers to ask themselves if they have enough working capital to move through one, two or three years of relatively at a loss,” Roberts said.

He said they can survive on their working capital and not pull equity out of their land.

Tighter profit margins

Barry Ward, production business management leader for OSU Extension, said many farmers will see much tighter profit margins in the near future. He said one factor is the land rent increases that farmers have been paying.

“Grain prices were up and the landlords wanted a bigger piece of the pie, so you guys started paying,” said Ward.

Another reason for high land values, rents and prices have been related to the low interest rates. Many farmers were able to purchase land with the low interest rates, but the demand pushed land prices even higher.

Break even point

Ward estimates the break-even point for corn in 2014 is $5.05 a bushel; for soybeans, $11.75 a bushel. He said those break-even prices take into account fertilizer, seed, machinery and land costs.

“I think that lower grain prices are going to have an impact, but on the same token, we’re still in a very volatile market situation.

Watch for opportunities

Ohio corn grower Gene Baumgardner says he still expects to find opportunities to sell corn at above his cost of production.

“I don’t sell to an ethanol plant, I don’t sell to a dairy farm, I sell into the marketplace. And those opportunities will come around,” said Baumgardner, who’s also a board member with the Ohio Corn Marketing Program.

Weather effects

The effects of the weather this growing season are not totally known, as harvest is just beginning in parts of the country.

Dennis Miller, a grain farmer from Salineville, Ohio, said his concern was a lengthy dry period over late summer, especially in states west of Ohio.

He believes national yield estimates are too optimistic, and that they will need to be corrected as harvest continues.

At the Farm Science Review, he noticed several thin-looking corn stalks and ears that are smaller than normal.

He said he doubts the sugar and starch content will be what it should this year. As a result, he expects it will take more corn to make the bushel weight that farmers are paid by. “I don’t think the corn is out there,” he said.

Delay in harvest

Rich Geiser, district manager for Brock Grain Systems, said the cool growing season “did not stop” what farmers set out to grow this year, but it has made for a delay.

That will likely mean a tighter harvest window and more need for grain drying after the crop is harvested.

Even in a normal year, he said farmers need larger bins, because yields are improving and the larger farm equipment makes harvest happen more quickly.

Realistic expectations

The lot at Seed Consultants Inc. was busy during the Farm Science Review, and general manager Chris Jeffries said the farmers he talked to were realistic about the decline in prices.

“They know it’s not going to keep on going,” Jeffries said.

Purchasing power

Dan Robinette, of Greene County, Ohio, farms about 1,500 acres. He said the tighter margins will mean less purchasing power — both for equipment and new land.

“We won’t be able to buy anything extra,” he said.

Jared Harris, of Doylestown, Ohio, farms 100 acres and said much of the same thing. He said the low grain prices are changing his marketing strategy and has him worried about what the future may hold.

“It’s definitely giving me less money to purchase equipment,” said Harris.

Conventional hybrids

Jeffries, of Seed Consultants Inc., said growers wee expressing a little more interest this fall in conventional hybrids because of the cost. Then Jeffries got a little philosophical. “As pessimistic as they are, they’re really optimistic.”

“Agriculture is the way it’s always been. You have good and you have bad,” he added. “People are realistic. They know it’s not going to last forever.”

Livestock producers

The lower grain prices may have a positive light for another group of farmers: the livestock producers who feed grain to cattle and other livestock.

Cassandra Tomlin, a crop and beef cattle farmer from Manchester, Ohio, said lower prices will make feed production more affordable.

“I think it’s a pro for us (producing) feed in the winter,” she said, adding it will be “less costly” and the cattle “more productive.”

Leave a Comment

Receive emails as this discussion progresses.

eNewsletter

Get our Top Stories in Your Inbox

Recent News