U.S. farmers are bringing in what’s expected to be a record-breaking harvest for both corn and soybeans. But all that productivity has a big financial downside: plunging prices that have many Midwest farmers hoping to merely break-even on this year’s crop.
Farmers will haul in 4 billion bushels of soybeans and 14.5 billion bushels of corn, according to USDA estimates. Those are record-breaking numbers, made possible by producers planting more corn and soybean acres and near-perfect weather in the Corn Belt.
Ten states could set records for corn production, led by Iowa and Illinois. Illinois is also expected to raise the bar as the front-runner among 15 states expected to set records for soybean production this fall. Indiana, Missouri and South Dakota farmers are also expected to set harvest records both corn and soybean harvests.
Demand can’t keep up with that jump in supply. Grain prices are at their lowest level since 2009. After peaking during 2008’s drought at about $8 per bushel, corn is selling for less than half that today.
That has farmers like Gene Trausch worried. From the cab of his John Deere combine, Trausch watches the machine churn through a field of soybeans. His irrigated soybean fields are showing big yields. So did the corn he recently picked.
“We out-produced ourselves,” said Trausch, who raises raise corn, soybeans and wheat near Minden in central Nebraska. “You always hope your neighbor burns up, hails out or dries up but you have a good crop. But everybody had a good crop this year.”
With dirt-cheap prices, farmers like Trausch are responding by holding back as many bushels as possible. Many built tall steel grain bins to hold their harvest and wait for higher prices. Some, like Trausch, are even using giant 100-yard-long white plastic bags as extra storage and filling the bags with soybeans instead of trucking them to the local elevator.
“Last year we didn’t hold on to much,” Trausch said. “It all went to town because of the way markets were. But this year we’re going to hold on to just about everything, about 90 percent.”
Trausch said he will earn 30 cents per bushel more on the soybeans he’s holding in the grain bags by storing them until January. With around 10,000 bushels of soybeans in each bag, Trausch can squeeze out an extra $3,000 per bag.
That makes a difference because it’s hard to pay for farming in 2014 on prices from 2009. The cost of farming rose quickly in that short time.
“Land, rents, machinery, pesticides, herbicides, everything (rose) across the board,” said agricultural economist Cory Walters, of the University of Nebraska Lincoln.
Rising costs and falling prices are a bad combination. Still, Walters said many farmers will have so much grain to sell, they’ll manage to make some money. Others will lean on taxpayer-subsidized crop insurance to stay in the black, or close to it.
“Does that mean we’re going to have multiple years of low prices and it’s all doom and gloom?” Walters asked. “No. I don’t buy that right now.”
But until prices improve, farmers who had cash to burn a couple years ago are suddenly pinching pennies and it’s already starting to show, as fears of low farm profits trickle through the rural economy.
Equipment manufacturers have seen that coming and are cutting costs. John Deere announced more than 1,000 layoffs at factories in Iowa. AGCO will lay off 111 workers at manufacturing facilities in Kansas.
Farmers aren’t shopping for big ticket tractors at Plains Equipment Group near Seward, Neb. Location manager Allen Troester says repairs and agricultural data services will have to make up the difference.
“With the commodity prices they’re just saying they’re just not going to (buy),” Troester said. “I think they’re going to hold off.”
Count Minden farmer Gene Trausch as one of those keeping his money on the sideline. Trausch says his farm is on solid ground financially, but he predicts others may not be able to weather a prolonged downturn.
“The ones that did go buy lots of high priced ground, or overextended on new equipment, or if you’re a young guy that just got into farming and just don’t have the resources,” Trausch said.
For them, he hopes things go back up as quickly as they came down.