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Grain Farming Gets Dearer 03/03/2015

Posted by Craig Haugaard on Mar 3, 2015 9:39:00 AM

"GRAIN FARMING GETS DEARER"

 

grainfarming

 

David Widmar, Associate in Nursing agriculture economic expert at Purdue University, aforementioned his studies show some grain farms square measure doubtless to lose cash next year.

 

“Things square measure wanting pretty powerful without delay for corn and soybean production," Widmar aforementioned. "And then after we inspect 2015, a number of the university budgets square measure showing negative returns.”

 

Yet, grain farms square measure price extra money these days than they were a decade past.  Widmar’s diary, Agricultural Economic Insights, used U.S. Department of Agriculture information to report that, “The market price of crop production in 2012 accrued forty eighth over 2007 levels,” because of accrued demand from China, the alcohol mandate, and crop shortages owing to the drought in 2012.

 

But whereas several farmers have more money available, their profit margins are shrinking since 2007 as a result of production prices rose quicker than earnings.

 

Widmar aforementioned the value of inputs – like land, seed, fertilizer, and chemicals - rose from eighty one cents on the greenback in 2007 to eighty three cents on the greenback in 2014.

 

It would break down like this:

For example farmers created $10 marketing their crop in 2007, however had to pay eighty one cents of every greenback ashore, seeds, fertilizer, and chemicals to plant next year’s crop, then they extremely solely created nineteen cents on the greenback. nineteen cents X $10 = $1.90 net.

 

Versus in 2014, for example farmers created $15 marketing their crop, however had to pay eighty three cents of every greenback ashore, seeds, plant food and chemicals to plant next year’s crop, then they are solely creating seventeen cents on the greenback. seventeen cents X $15 = $2.55 net.

 

This years’ downswing in corn and soybean costs suggests that farmers can need to navigate even slimmer profit margins. Widmar aforementioned they'll need to do additional with less to squeeze through subsequent few years.

 

“Maybe they'll twiddling my thumbs on a number of their phosphoric and metal fertilizers," Widmar aforementioned. "Maybe they'll prune their seeding rates on corn and soybeans. perhaps they'll hold off thereon additional antifungal application.”

 

He expects farm margins to enhance within the long-term.

 

 

"Impact on Customers"

 

impactoncustomers2

 

Widmar aforementioned that since not a lot of corn from a corn farm lands up in your bowl of Corn Flakes, cereal costs won’t fall a lot of. However, corn could be a major ingredient in stock feed, that means we would see cheaper meat costs in 2015.

 

An additional immediate impact are on rural communities, that admit farmers to pump money into their native economies. With revenues and incomes shrinking, native businesses will expect farmers to pay less cash around city.

 

 

“We’re progressing to see the family living expense -- the quantity of cash left over to support the family -- goes to induce tighter," aforementioned Widmar. "So we’re progressing to see them prune thereon, which goes anyplace from shopping for new automobile, to creating enhancements to their house, to happening vacation.”

 

Widmar, World Health Organization grew abreast of a grain and stock farm in southwest Kansas, aforementioned in his expertise, farmers pay longer worrying once profits shrink.

 

“It’s powerful. It's nerve-racking," aforementioned Widmar." "I assume it makes North American nation higher managers within the long-term. and that we pay lots of your time round the table talking regarding what we'd like to try to to and deciding the way forward.”

 

He aforementioned it’s not fun, but added, “We positively relish times like we have a tendency to have had the last many years – the great times - then we take one with the opposite.”

 

 

 

 

 

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This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and North Central Farmers Elevator and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples.

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Topics: Grain Markets

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