Abundant crops but leaner profits predicted for farmers
|By Tyrel Linkhorn, The Blade, Toledo, Ohio|
|McClatchy-Tribune Information Services|
U.S. corn farmers are raising what's expected to be the biggest haul on record -- and are to suffer financially because of it.
"The profit picture looks decidedly worse than it has in the past few years. It's just kind of a matter of trying to quantify it a bit," said
Ideal growing conditions across much of the country has this year's crops looking pristine. The
December corn futures have been hovering around
It's a frustrating thing for farmers to look out over green fields loaded with plump ears of corn and healthy bean pods and see very little profit. But, that's farming.
"We've got a very good yield ahead of us, but the price is the concern," said
When it does go down, it trickles to other parts of the rural economy.
"The bottom line is if [farmers] make money they will spend money, if they don't, they won't," said
"You never know until they get their yields, but the prices are down, and it's definitely going to affect their buying decisions," he said.
High cost of land
The low commodity prices are compounded by a recent and rapid rise in land prices.
Fields that a few years ago could have been had for
Many agricultural economists have been concerned about that disconnect, and it seems to be coming to pass this year.
"When people are squeezed on land cost, especially those who rented a good bit of land or bought a lot of land when it was really expensive, they're going to be in a real crunch this year," said
The problem is especially magnified for those who pay rent to grow crops on land they don't own -- a common arrangement in agriculture.
The break-even point varies a great deal among farms, but it's generally accepted that the current prices won't cut it.
"Let's put it this way," farmer
Some farmers were smart -- or lucky -- enough to lock a portion of their output in futures contracts before prices took a nosedive. Those contracts put guarantees into their lives, but they also introduce risk. If prices go up as the year wears on, farmers don't get the benefit. Contracts also lock farmers into delivering a certain amount of grain. If their fields flood, dry out, or get ravaged by hail, they're still on the hook for meeting their obligations.
Now, many are waiting.
"Farmers have a tendency of not selling at losses if they don't have to, so at this time a lot of them are sitting on their hands hoping the market bounces,"
In a year like this, a lot of grain will go into storage as producers hope to hold out for higher prices. But,
Not a catastrophe
Some losses could be covered by special crop insurance that protects against steep price drops, though that will largely depend on where grain prices settle. Even if losses aren't covered, a bad year in 2014 isn't going to be catastrophic for the industry, which has enjoyed a long run of high profitability.
"There's a lot of equity built in the last few years, so they'll certainly be able to survive and go on,"
That puts things in perspective, said
"Yes, this year is expected to be lower farm income, but it isn't going to be so dramatically lower that they won't be profitable, because they will be," he said. "It isn't a dramatic decrease. It's not like farm income goes to zero this year. Farm income will still be pretty good."
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