“Farmers know that there are more bad years than there are
really good years,” agriculture economist Steve Irwin of the
University of Illinois said.
Put the downturn in context, he said.
The reserves that have been built up over the past three years
give farmers a substantial cushion, he said. Supply-demand
balances for grains are not historically burdensome at this
time.
“Looking six to 18 months down the road, which is what is top of
mind in the market, then things are looking grimmer,” Irwin
said.
On the supply side, large South American crops will be hitting
the markets in the next few months. Here in the United States,
the acreage base for spring-planted grain crops is expected to
remain large by historical standards, adding to the supply-side
burden.
On the demand side, overall weakness, particularly in the demand
from China, where they are having economic struggles, has hurt
exports. A slowdown in the demand for meat in China has dampened
the demand for imported feedstuff, Irwin said.
Demand from China "is still growing. It is just not exploding as
quickly as it has for much of the last decade,” Irwin said.
“Supply trends have started to impact demand trends.
Fundamentally, that is what happened.”
According to the current projected prices for corn and soybeans
next fall, both corn and soybeans in Illinois look to lose money
this year, with soybeans losing far less than corn, Irwin said.
“Anybody who has farmed for any length of time knows that there
is a cycle in grain prices. It is hard to predict but prices are
not going to stay as high as they have been forever,” he said.
Farmers are economizing, Irwin said.
Where they can, farmers will lean toward planting more soybean
acres and less corn this spring – but only at the margins, Irwin
said. Some farmers will replace corn acres with sorghum, which
is a less input-intensive feed grain. Farmers will put off
making large equipment purchases. And they will rein in
household living expenses, Irwin said.
“Income outlook is negative for the immediate future, but things
can change very fast depending on the weather,” Irwin said.
A significant hot dry summer could send grain prices shooting
right back up, he said.
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