$4.20 Corn Needed to Stabilize Grain Farm Income

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$4.20 Corn Needed to Stabilize Grain Farm Income
Gary Schnitkey, Extension Agricultural Economist - University of Illinois
link to article online

Grain farmers throughout the Midwest are suffering through a third straight year of losses and prices don’t look to go high enough, yet, to stabilize net incomes. A University of Illinois study suggests the cash price of corn needs to be $4.20 a bushel to make that happen. Todd Gleason has more…

It’s been a rough couple of years and grain farmers…
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It’s been a rough couple of years and grain farmers need higher prices to stabilize their operations. Stable means $60,000 in on and off farm income on a 1500 acre corn and soybean farm in central Illinois says University of Illinois Agricultural Economist Gary Schnitkey.

Schnitkey :25 …see gains in net income and financial stability.

Quote Summary - To have that happen prices have to be a $4.20 for corn, $10.20 for soybeans. If we have those prices, and lower yields, then we can expect to see financial working capital deteriorate and we are above those we can expect to see gains in net income and financial stability.

That is to say, if the price of corn is $4.20 and the crop is below average, the farm wouldn’t be financially stable. By the way, the $60,000 net income isn’t an arbitrary number.

Schnitkey :25 …between financial stability and not financial stability.

Quote Summary - No, we look at our Illinois FBFM records and at that level we farmers able to make investments that need to be made, withdrawing some level of for family living expenses, and for repaying debt. So, this is the breakeven level between financial stability and not financial stability.

The key to quantifying this work says Gary Schnitkey is to look at prices in August. This is because we’ll be close enough to harvest to have a pretty good idea about actual cash prices for the crop, and looking forward to the 2017 season.

Schnitkey :10 …cutting costs for the 2017 production.

Quote Summary - So, if we are $4.00 and below corn prices, then we are going to have to look pretty hard, again, and cutting costs for the 2017 production.

It all means grain farmers throughout the nation may need to be wary of the price of corn in Chicago, and take advantage of rallies as they happen.