Ag economist advice: Hold on to your grain, if possible

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LONDON, Ohio — Down, down, down they go. Grain prices are falling and it leaves farmers wondering how far they will go.

The farmers attending the Farm Science Review were conclusive when asked how they thought this harvest would go: “It’s a break even year,” said Richard Holden, a Brown County grain farmer.

Demand

Simply put, the demand in the corn and soybean sectors just isn’t what it used to be five years ago, according to Matt Roberts, Ohio State University Extension Ag Economist.

He explained that the world has been short on grain for eight years but not ethanol demand has flat lined and so has China’s demand. In addition, he feels that farmers are feeling a “double whammy” this year because they are producing a bumper crop.

Roberts also said that the drought in the Midwest kept the supply tight which meant higher prices. But that has changed and he expects lower prices for awhile.

“I think we are in the era of $3.50-$4 corn and $9.50-$10 soybeans,” Roberts said.

He added that these type prices are what is considered normal and means that farmers have to get used to them.

Decrease still possible

Roberts said prices aren’t done falling. He feels there is a bearish tone in the market and the crop size is probably going to grow as farmers begin to harvest.

He said there is a bearish tone in the market and feels prices will probably fall 20 cents to 40-50 cents more this fall.

The good news is that he expects the prices to rebound a little and the result will probably be higher prices in December, January and February.

Hard freeze

Roberts said the one exception could be if an area experiences a hard freeze before harvest.

“It could be the only pop in the market I see,” Roberts said.

He went to say that even if a hard freeze is felt somewhere the result could be a 20 cent-25 cent increase.

His best advice to farmers is for them to hold on to their crop in storage as long as possible.

“I think if you can hold off on selling then the better off you will be. And I also think you are better off holding corn until May then holding soybeans until February,” Roberts said.

South America

Another thing Roberts said farmers should watch our for is how the lower prices will impact South America. He said some producers forget that the low prices aren’t just here in the United States, they are spread across the world. He said he expects a reduction in soybean planting.

Expenses

Roberts added that farmers are going to have to take a look at their expenses as part of the farm management plant. He said many farms used the extra cash flow when prices were high to purchase land or pay for planting supplies so the farm expenses have gone up and income has come down.

He added that another area of significant growth was living expenses for the farm family.

“They just weren’t at a sustainable level of profitability the past few years,” Roberts said.

He said farmers should get used to $75-$80 an acre profitability in order to succeed.

Roberts said he doesn’t expect the prices farmers have seen in the past several years to return but hopes that farmers have learned to manage their operation.

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