2017 Looks to be Farm Losses Year 4

ifr160819–190
2017 Looks to be Farm Losses Year 4
Gary Schnitkey, Agricultural Economist - University of Illinois Extension
Tom Tracy, CEO & President - Farm Credit Illinois

The big corn and soybean crops in the United States are putting pressure on prices for this year and next. The result, as Todd Gleason reports, could be the fourth year in a row of losses on grain farms in the Midwest.

The crop in the Midwest looks great…
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The crops in the Midwest look great! Phenomenal! Unbelievable in fact. However, with so much bounty in the field comes incredibly tight budgets on the farm. Grain farmers will lose money not only this year says University of Illinois Agricultural Economist Gary Schnitkey, but probably next year, too.

Schnitkey :25 …2017 if those in fact do turn out to be the prices.

Quote Summary - What we are looking at is 2017. The recent large crops have lowered our projected prices to $3.50 for corn and $9.00 for soybeans. If you use those in a budget you must continue to cut costs, even more-so than was done in the past because there will be very low revenues in 2017 if those in fact do turn out to be the prices.

The only option is to lower input costs - the prices paid for fertilizer, seed, and cash rent in particular.

Schnitkey :14 …a zero return to the farmer.

Quote Summary - We looked at a 200 bushel expected yield. And at that price cash rents would have to be about $220. This is a lot lower than most cash rents right now, and would still net a zero return to the farmer.

A zero return even after a significant cut in cash rent. Schnitkey says the other thing farmers should consider is planting soybeans rather than corn. , especially if corn prices stay below $4.00. On that note, taking advantage of the marketing opportunities afforded when using crop insurance is another option thinks Tom Tracy of Farm Credit Illinois.

Tracy :30 …come in there to make a significant sale.

Quote Summary - From a marketing stand point we see the ability of the farmer to take on risk earlier in the cycle when producing a crop. It is just more pronounced we people have deeper crop insurance coverage. When I was a young man you didn’t here of people making significant sales early in the crop season because you didn’t know what you were going to produce. Now, with crop insurance, you can guarantee a significant amount of that revenue and you can come in there to make a significant sale.

This year would be a case-and-point. Farmers, confident of their revenue streams because of crop insurance, could have sold corn for more than $4.00 a bushel just a month ago.