Continued low prices have some corn and soybean growers trying to figure out how to hang on
Farmers clean up their equipment after harvest each year. This year, some are also polishing their résumés.
The situation facing corn and soybean growers has southeast Nebraska farmer Steve Sugden looking for an off-farm job to help support his family. That includes his wife, a schoolteacher; his daughter, a University of Nebraska junior; and twin sons, freshmen in high school.
The low prices farmers are fetching for their crops don’t cover business costs at many operations. Average monthly prices for corn have been below $3.50 a bushel for over a year now; farmers received over $7 and in some cases over $8 in 2012 and 2013.Meanwhile, Sugden said, family living expenses haven’t come down; just consider the cost of car insurance for those three young drivers, he said.“The numbers don’t lie,” Sugden said.
Sugden said he has farming in his blood, and he’s not planning a farm sale, choosing to keep the land his family owns free and clear instead of using it as collateral on a loan to pay for next year’s farm operations.Sugden said he’s at a crossroads.
He has company. Eastern Nebraska farm auctioneers said they aren’t seeing an uptick in farm sales driven by financial stress, but farm finance experts said Corn Belt farmers and their bankers do face another winter of tough decisions if they want to renew operating loans and keep farming next year.
Farm income plunged for three straight years from 2014, and only a slight uptick is expected this year, the U.S. Department of Agriculture said in November. Crop revenue continues to fall, however. Livestock sales are growing.
The picture can be dramatically different from one farm to the next, depending on the size of the farm, the type of crops or livestock raised, the climate and soil, marketing decisions and financial fundamentals.
As many as half of farmers and ranchers are profitable this year, Nebraska Farm Bureau economist Jay Rempe said. About a third are breaking even, he said, and the rest are “really struggling.”
Across the nation, the median farm income will drop, to a loss of nearly $1,100 in 2017. In other words, most farms will lose money.
And next year, belt-tightening is likely to continue, as economists’ forecasts call for no meaningful increases in crop prices.
...MUCH MOREOne of the reasons for stagnant low prices: There is a glut of grain on the market. And U.S. farmers this coming spring are expected to plant still more acres than they did this year of corn and soybeans. Competition also is growing globally. So there’s no reason to expect prices to rise, economists say....
And from the Federal Reserve Bank of Kansas City:
Farm Economy Seeks Footing
The farm economy in the Tenth District continued to show signs of stabilizing in the third quarter of 2017, even as financial stress continued to build and income continued to decline. Although farm income was down from a year ago, the decrease was smaller than in recent years. Farmland values also continued to weaken, but only marginally. Although agricultural credit conditions continued to weaken, bankers indicated they do not expect the deterioration to lead to a sharp rise in asset liquidation.
Farm Income
Farm income in the Federal Reserve’s Tenth District decreased in the third quarter, but at a slower rate. For the 13th consecutive quarter, a majority of bankers reported that farm income was lower than a year ago, but that the pace of the decline was less significant than recent quarters (Chart 1). In fact, only 52 percent of bankers reported that farm income had fallen from a year ago, the lowest share in two years. Moreover, slightly less than half of survey respondents expected farm income to decrease in the fourth quarter. Similarly, bankers expected capital and household spending in the farm sector to continue to decline in the third quarter, but also at a slower pace.
Expectations of future declines in farm income moderated throughout the District in the third quarter. The share of bankers expecting further declines in income in the fourth quarter was smaller than a year ago in each state (Chart 2). In western Missouri, a region where crop production has been very strong in recent years, the share of bankers expecting lower income next quarter decreased for a third straight year. Bankers in Kansas, Nebraska and Oklahoma also expected the decline in farm income to slow in the months ahead. In Oklahoma, a region that recently has improved alongside relatively strong livestock markets1, only 25 percent of bankers expected farm income to decline in the coming months.
Although the pace of decline in farm income has moderated, the prolonged downturn in the District’s farm economy has continued to cut into the working capital of farm borrowers. Nearly 82 percent of bankers reported a year-over-year decline in crop producers’ working capital (Chart 3). Although the deterioration was less severe than in 2016, more bankers reported some deterioration in working capital in 2017 than in both 2014 and 2015. Less than 5 percent of bankers indicated working capital had improved in the third quarter.
Land Values
Prolonged declines in farm income also continued to push farmland values lower, but at a modest pace. For example, the value of nonirrigated and irrigated cropland declined 3 percent and 6 percent, respectively, from the previous year (Chart 4). Although the magnitudes of recent declines have yet to approach the magnitudes of the 1980s, the duration of the recent downturn in cropland values has approached that of the 1980s. The value of ranchland also continued to soften in the third quarter at a modest pace....
