Jesse Newman reported yesterday at The Wall Street Journal Online that, “Federal forecasters anticipate record corn and soybeans harvests this year, likely extending a yearslong downdraft in agricultural prices and farm profits.
“The U.S. Department of Agriculture on Monday projected farmers this fall will collect a record 15.09 billion bushels of corn and 4.2 billion bushels of soybeans, topping analyst expectations and pressuring futures prices for the crops.
“The record haul could spell more trouble for farmers straining to cut costs and bunker grain amid a third straight year of falling prices for some crops.”
Graph From USDA’s Crop Production Report
Ms. Newman noted that, “The estimate for a massive soybean crop comes as farmers face their lowest average income levels since 2009, according to data released last month by the USDA, with net farm income projected to drop 11.5% to $71.5 billion this year.”
Christopher Doering reported on the front page of the business section in today’s Des Moines Register that, “The bumper crops, however, are expected to do little to help farmers battling low commodity prices that have left many struggling to post a profit.”
Mr. Doering stated that, “The prolonged downturn in commodity prices has spread beyond the farm and also is affecting banks, equipment companies and seed and chemical manufacturers, including DuPont-Pioneer in Johnston.”
And Associated Press writer David Pitt reported today that, “Aside from a sense of pride in breaking the previous record by nearly a billion bushels, farmers won’t benefit. They’ll lose money on virtually every cob.
“It’ll be the third consecutive year in which most corn farmers will spend more than they’ll earn. The growing has been too good and the resulting glut of corn depressed prices to a decade-low. It’s a similar story for soybeans, the second most common Midwest crop.”
Mr. Pitt noted that, “As a result, farmers are cutting costs, dipping into savings or going further into debt. Federal crop insurance and payments that help protect farmers when prices fall too low offer some protection, yet many farmers and their spouses supplement income with off-the-farm jobs. The drop in farm profits raises questions about agriculture’s boom-and-bust cycles and why people adhere to what at times is seemingly not a sustainable business model.”
Today’s AP article added that, “To get by, nearly a third of U.S. farms have to borrow money, and borrowing has increased because farmers need to finance operating costs and near-historic low interest rates make borrowing inexpensive. But banks are reporting an increase of past-due loans, an indication that borrowers are struggling to repay in a time of tight profit margins.”
Meanwhile, Bloomberg writers Megan Durisin and Jeff Wilson reported yesterday that, “The big crop could leave farmers and grain elevators squeezed on space to store excess supplies. U.S. soybean inventories before the 2017 harvest will rise 87 percent to 9.95 million tons, the highest in a decade, the USDA estimates. Stockpiles are climbing as the USDA lowered its outlook for imports by China, the No. 1 consumer, to 86 million tons, down from 87 million forecast a month earlier.”