by Hayat Norimine
Illinois farmers will likely take a hit with this year’s corn harvest due to an existing surplus of the grain and a fall bumper crop that will further swell supply.
March corn prices at the Chicago Board of Trade remain at $4.34 a bushel compared with a record high in 2012 of $6.80 to $8 a bushel. While this is the first month since August that corn prices have improved, increasing by 2.8 percent, farmers are pessimistic about the future and expect high supply and low prices to continue.
“It’s going nowhere,” said Scott Shellady, a trader at the Chicago Board of Trade, of the commodities market for corn. “There’s a lot of farmer overhang. I think they’re hoping for a rally and that might not happen.”
In 2013 the U.S. produced approximately 14 billion bushels, and the USDA forecasts approximately 2 billion bushels of excess corn by September.
Meanwhile cash prices for rented farmland — which represents more than three-fourths of Illinois land tilled — remain relatively stable, taking up a larger share of costs as farmers’ profits decline.
Greater efficiency in the U.S. last year produced more corn than what consumers demanded.
Paul Rasmussen, a farmer in Genoa, Ill., said he produces nearly 200,000 bushels of corn a year. With a loss of at least $2 a bushel, he projects seeing $400,000 less in revenue during 2014.
This will affect his overall business decision-making, he said, as he anticipates less profit this season and considers holding off on buying equipment.
“You build a structure of how you run your business,” Rasmussen said. “Take away one-third of your income … that makes a big impact.”
Bruce Huber, a farm manager and senior vice president of agricultural services, oversees more than 300 properties, for which cash rent prices have decreased 5 percent this year compared with those of 2013. Renting farmland, he said, will squeeze corn growers, who will see smaller profits this year.
Rasmussen is currently renegotiating cash rent for about one-sixth of his land that isn’t family-owned.
Rodney Weinzierl, executive director for Illinois Corn Growers Association, said production is outpacing demand increases.
“It really turns more into, how do we create more demand and be as efficient as we possibly can on costs?” Weinzierl said.
Huber sees the corn market as high-risk-high-reward. While lower corn prices will not affect his decisions, he said much of the performance of his corn farms will depend on the weather in the spring.
“It’s hard to forecast,” Huber said. “I’m just kind of going forward like the same as we always have.”
Source : medill.northwestern.edu