Calendar | Logan County Extension Unit | Ag News Elsewhere [fresh daily from the Web]

 Special feature from the 2013 Farm Outlook magazine

Costs grew and income shrank for producers in 2013

By Jim Youngquist

Send a link to a friend 

[October 30, 2013]  At the time of this writing, it is Oct. 20, 2013, and less than 50 percent of the crops have been harvested in Logan County. There are three reasons for this late harvest.

The first reason is that because of continuous rains in the spring, beans and corn were planted very late, some as late as May 15 (significant because that was the plant date for corn back when it was grandpa's farm). Late planting pushes back the harvest date.

The second reason that such large contingents of the crops are still in the field is that the corn crop is coming in very wet, with harvested moisture above 20, and producers are taking this extra bit of time before the first major frost to dry the corn down in the field. Corn with lower moisture levels presented at the elevator means the producer will pay less for expensive drying processes.

And the third reason the crops are still in the field is that the prices for corn and beans right now are lower than desired, and lower than they have historically been for the last couple of years, and the size of the bean crop is variably less than hoped for. Since prices are low and the size of each bean is less than desired, why hurry to get it to market.

The corn crop across the nation is good to excellent, translating into lower prices for all the producers. Together with higher input prices, this means that the producer will have a much lower net profit per acre since 2007. Added costs at the point of sale, such as higher drying costs and the cost of testing for quality issues such as aflatoxin, further erode the profit per acre (see the introduction by John Fulton).

The only hedge farmers have against lower immediate prices at harvest is to either put a portion of their crop in on-farm storage at an additional expense, or put a portion into storage at the elevator -- again, an added expense.

2011 was the great change year for the price of corn. The average sale price for corn prior to 2011 fell short of the $4 mark, with 2010 averaging $3.83. The average price in 2011 jumped to $6.01 nationally, and higher regionally, an increase of almost 64 percent. Perhaps this jump in prices was due to the optimism of increasing local markets for corn with the expansion of ethanol production and the federal stimulus for ethanol production. This jump in prices continued in 2012 to an average of $6.67 due to the drought-related shortfall of the Midwestern crop.

One of the possible dilemmas for producers is related to the development of drought-tolerant corn. Drought-tolerant corn is the result of selecting varieties of seed that showed better characteristics of performance, particularly valuable during drought conditions.

Then the expected glut of corn in 2013 and the failed expansion of local markets pushed average pricing back down below the 2011 mark.

Any increase in cost and decrease in price shrinks the on-farm profit and the amount of money available in farming regions for ag-related products.

Drought conditions in both 2012 and 2013 should have dried corn down to lower moisture levels by the expected harvest dates, but in both years, producers found that their test harvests brought in corn with moisture levels much higher than expected.

This year's initial spot tests in the third week in September brought in corn testing at 23 percent, a level that was rejected at some elevators, causing the corn harvest to be pushed back.

Since the killer frost has not yet hit in earnest in Logan County, producers put the corn harvest on hold to allow for further drying and instead began to harvest beans. The soybean crop was variable since the rains crucial to bean production during the last two weeks of production were almost nonexistent. Beans began to dry earlier than expected in the fields, and the size of the crop was less than hoped for in many areas.

Corn harvested three weeks later, in the middle of October, showed that the crop had dried down only about 2 percent, to 21. Killer frosts continue to be delayed (a killer frost prevents the further drying of corn in the fields because the tissues in the corn plant for moving moisture are damaged or destroyed), and strips of corn in the fields continue to stay green.

[to top of second column]

A possible explanation for this apparent failure to dry in the fields is that the very same characteristics that make drought-tolerant corn excellent during drought years also cause the plant and, more important, the kernels to hold on to moisture and dry more slowly. The result is added cost to dry the harvested corn.

Altogether, higher input costs and lower sale prices translate to lower profits per acre for the producer.

A contingent of Logan County farmers got together in 2005 in an attempt to increase the local market for corn with the development of an ethanol plant in the county. A local ethanol production facility would give local producers another outlet for their corn crop and would likely increase the profit margin for participating farmers. This valiant effort to increase profits came to a screeching halt late in 2011, mostly due to the protests by Logan County residents who resisted locating the ethanol plant in their "backyards," followed by the shrinking federal ethanol subsidy, making the success of the ethanol production facility doubtful.

This failure to locate a local competing outlet for the corn crop left Logan County producers at the mercy of the Chicago market and large-scale buyers, ADM and Cargill.

Input costs are likely to continue to climb as new challenges are presented to producers. Production will follow the weather and climate trends, sometimes making Logan County producers the winners in the competition to grow a larger-than-usual crop when producers in other regions fall below their norm, and sometimes making Logan County producers the losers in the production competition. Costs at the point of sale will likely continue to rise as new legislation calls for more testing for safety and further restricts the sale of damaged corn.

These and other challenges have made the selling price and costs to market a game changer.

Perhaps the most adequate answer is another attempt to develop more diverse and local markets for corn and beans, or diversify the crop with specialty food crops to local markets.

Either way, being a producer today is a very challenging job.



< Recent articles

Back to top