Crop farmers encouraged to proceed with caution

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Row crop farmers at the American Farm Bureau Federation’s 95th Annual Convention were presented with a cloudy forecast in the years ahead and advised to plan accordingly.

High grain prices during years of drought allowed farmers to purchase new equipment and acquire additional land, even as farmland prices skyrocketed to record levels. Matthew Roberts, an associate professor at Ohio State University’s Department of Agricultural, Environmental and Development Economics, told a group of farmers in a workshop Monday about the factors that will pull the grain market lower.

“The last six years have been extraordinary years if you are a row crop producer. It’s been the best six years in history. The next six years will not be like that.”

Farmland Roberts pointed to record corn production in 2013 and limited growth in the ethanol industry as reasons for lower corn prices. The ethanol boom and drought-pressured crop yields had previously helped corn and soybean prices to rise above $8 per bushel and over $17, respectively, in 2012.

Roberts advised farmers to prepare for the gloomy forecast by saving money, claiming cash is the only way to ultimately manage risk. He pointed to large farm operators and younger farmers, who haven’t managed a farm through hard times, as the groups most likely to be affected.

“We are entering a four year to five year period of lower costs and profitability. I think we’ll see some farms (that expanded aggressively) in the corn belt go bankrupt,” he predicted. “Put one year’s worth of land charges (above normal working capital needs) in the bank as soon as possible.

Read more here.

Farmers are seeing lower prices for corn, which closed at $4.35 on Monday, and higher land prices and cash rents across the Midwest. Reuters reports more than half of the 250 million acres of corn, soybean and wheat land in the United States are rented. Kent Olson, an economist at the University of Minnesota, says many farmers are already starting to feel the squeeze between revenue, costs and rent.



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