Summer is Coming
As I wrote this column early last week, I looked out the window and realized it was snowing. Well, no big deal – it is only the first of February, but here I was thinking about next summer. I realized I was thinking like a farmer.
Farmers, like most of agriculture, are always planning – especially during the winter. They are always looking to lower input costs, shop around for markets, good buys and a good auction to attend. In big farming regions, there are many land and farm equipment auctions just as we have bull sales January through April.
Farmers across the nation are feeling the effects of inflation just as hard as livestock producers. They have more markets to monitor and the weather can make them or break them. The current volatility on commodities is really hurting, even though grain prices and other crops are high at this time.
Last week, soybeans started February at $15 per bushel, while wheat topped $8 and corn was around $6.34 per bushel. The ethanol market has been growing as people started driving last summer, but now ethanol’s production has met demand, so this should keep corn stable, unless South American countries like Brazil, have dry weather.
Similar to meat prices, grain prices depend heavily on good export markets. The U.S. Department of Agriculture (USDA) showed $172.2 billion came from farm receipts over the last fiscal year ending in September. For the current fiscal year, USDA expects dollars of farm receipts to rise to $175.5 billion. The USDA figures for every one dollar spent in exports, 20 cents come from farm receipts. This is great revenue for agriculture.
Farming, like other businesses in America, depend on stability in the markets to be sustainable. Market prices making drastic changes – new lows and new highs – are hard to manage as a business. Oil prices at $100 per barrel, fertilizer at $1,200 per ton or higher and average farmland at $9,000 per acre makes it tough to make a profit, even with high crops for grains.
Currently, the 600-pound gorilla out there is the potential invasion of Ukraine by Russia. The Ukraine is a large grower and exporter of grains. With weather similar to our Corn Belt, farming is big business.
Russia has considered the Ukraine as a part of Russia since the 12th century and since the downfall of Russia in the 20th century, they really want it back under Russian control.
Some say Russia doesn’t have to attack or invade Ukraine, they just need to place a blockade on its southern border and the strategic ports on the Black Sea to control Ukraine. The farmers don’t want an invasion which will tear up fields and postpone harvesting their crops.
American farmers today are waiting for investors to start buying commodities again. Investors are not buying into oil much these days and this worries farmers. But big money and foreign owners are buying crop lands as more historic farm families go out of business.
Net farm income is projected to fall 19 percent this year to a still strong $99 billion and, at this level, farm income would be the second highest since the record $123.7 billion in 2013. But it all depends on markets and inputs.