Today's feature from the LDN Spring FARM OUTLOOK

The big squeeze

By Jim Youngquist

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[April 01, 2014]  Every year Logan County producers roll the dice and play the game. What will come of their efforts, only God knows. Most producers in this county wish they had a little foreknowledge too.

The good news in 2013: Despite late planting, productivity was good. Corn in Logan County came in at better than 160 bushels per acre.

The bad news: The rest of the country had very good productivity too.

The result: The total crop was 30 percent larger than the crop in 2012, a drought year, but the total value for the crop was 9.8 percent lower. In 2012, corn was nearly $8 per bushel. At harvest in 2013, corn was around $4.

Who won in 2013? Estimates put the value of the 2012 grain crop at $185.12 billion and the 2013 crop at $166.95 billion. Big grain consumers like ADM and Cargill certainly got the advantage in 2013 because they had a crop that was 30 percent larger in 2013 but cost much less per bushel

Who lost in 2013? Conservative estimates for 2013 put the results at between $50 and $82 loss per acre for central Illinois producers. There is a glut of corn on the market and fewer places to sell it. This means higher big-corporate profits for the middleman. And the lower price per bushel to the big grain conglomerates did not translate to lower food or meat prices for the average citizen.

Better productivity in 2013 should bring a bunch of benefits, but along with greater productivity came greater costs.

Matt Whitson, a producer from over near Mount Pulaski, said that because of the late planting, corn came out of the fields really wet and cost a lot more to dry. A bigger crop also costs more in fuel to bring it in and move it around. Inputs have not adjusted, and cash rents are still the same. The result for 2013 is that farmers may cover most of the inputs and equipment costs, but there is no profit left for the household.

Whitson compared farming in Logan County to gambling in Las Vegas. Sometimes you win, sometimes you lose. But it's really tough to win (productivity) and lose (price) at the same time!

Doug Thompson, a producer in the northern part of Logan County, near Atlanta, said it is very important to manage the entire operation with precision and know where you are all the time. Thompson, who also teaches a short course on the subject every year for Lincoln Land Community College, says that careful cost accounting and keeping careful track of productivity can certainly make quite a difference in the results of the entire operation. Sloppy management brings worse results. Thompson said he really enjoys the class and always learns a lot every year being the teacher.

When asked what he was going to do differently for the upcoming season, Whitson said it is difficult to make short-term course corrections, because the time commitments for the upcoming crop are very close to the harvest time of the previous crop. "By the time we have the crop out of the field, we have made most of our commitments for the upcoming year," he said.

In the long term, Whitson said he planned to do more no-till planting, figure out how to cut costs and get the inputs down.

When asked if he was going to shift more into beans, Whitson said he maintained it at 50-50 and didn't think he would make any changes there. He cited that the price for corn had edged up about 50 cents since the harvest because the market predicts a shift into beans, of which there continues to be a shortage. This shift into beans will lower the total acreage devoted to corn and has helped raise the price of corn based on futures.

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Both Whitson and Thompson are big believers in on-farm storage. They both have facilities to store just about everything they produce, and they carefully watch the current market prices to try to gain an advantage when prices edge up.

When asked if they thought there might be a shift away from sharecropping by landlords, both Thompson and Whitson said no. And Whitson believes that competition between producers steers the price of cash rent. Although there is a great deal of competition for access to acreage, all the producers face the same market stresses, and pressure from the producers helps convey how they are willing to participate with landlords.

When asked to predict what the upcoming season will bring, Whitson said we are currently dry and that the recent rains and snows are not helping groundwater levels, because the ground is frozen down to as much as 24 inches in some areas. All that water ran off and raised the levels of creeks and streams but didn't do anything for the available groundwater. We don't know yet when spring will break or if it will be wet, but if it is a wet spring, "rain makes grain."

Both Whitson and Thompson acknowledged that there is definitely a kind of competition in farming. When somebody does well and all the rest have poor productivity, the one who did well is rewarded generously. When everyone does well in productivity, everybody is punished equally. Unfortunately, in order to have a higher price, some portion of the country or world has to have a poorer yield. "Nobody you know or anybody specific," he said. But then again, he really doesn't wish that on anybody.

When asked why he stays in the game, Whitson replied that this is what he has always done. His dad farmed, and he has farmed all his life. It's in his blood. "And, you have to do something," he said. "This is what I do." He added that despite the trials and troubles, "The Lord is taking care of me!"


Author's note: If there is any lack of understanding, anything left out or misstatement in this article, it is certainly mine. The two producers I interviewed know this stuff inside and out and did their best to help me understand and ask the right questions. A big thanks to Doug Thompson and Matt Whitson for their patience.


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