Sunday, December 8, 2013

More on Farm Profitability

From the Des Moines Register:
Economists expect Iowa corn and soybean growers will lose money over the next four years, beginning with this year’s harvest, squeezed by low commodity prices and high production costs.
The potential downturn follows a boom that saw growers worldwide bringing millions more acres into production to take advantage of record-high prices.
Experts in Iowa compare the downturn to the devastating 1980s farm crisis, the only time in at least 60 years that the state’s farm industry posted a loss. This correction is unlikely to be as severe, because farmers are coming off record-high net incomes. But enough similarities exist to cause concern.
“We’ll likely see some bad times moving forward,” Chad Hart, an Iowa State University agriculture economist, told growers at the Iowa Farm Bureau annual meeting last week.
Even with a hoped-for soft landing, Iowa is expected to see a $1.4 billion hit to farm income this year alone, a blow that will ripple through Iowa’s slowly recovering economy.
Adding to concerns is a proposed rollback in the amount of renewable fuels that must be blended into the U.S. fuel supply. That could trim another 10 cents to 25 cents from corn prices, which, at about $4.20 a bushel, are already 45 percent lower than a year ago, experts say.
However, livestock producers should fare better:
Lower corn and soybean prices, though, will help Iowa livestock producers, who have suffered through recent losses as a result of high corn and soybean prices.
“It’s a little frustrating to hear people talk about how good agriculture has been,” said Ed Greiman, who raises 2,000 cattle near Garner with his brother, Matt. “It’s been phenomenal for corn and soybeans. But just as good as it’s been for them, it’s been as bad for us.”
Livestock production makes up about 40 percent of the state’s farm cash receipts, federal data show.
The experts are still saying that farmers aren't as leveraged as they were in the '80s, so things shouldn't be nearly as bad.  We'll see.  Experts didn't think there would be a residential mortgage crisis, either.

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