And now, We Drop the Farm Gate Price

As we all know, there are cycles in things. There are natural ups and downs in production of food stuffs as well as in consumption. Guess what? The natural growing season makes it easy for prices to seriously fluctuate. The unnatural economic situation makes it very difficult for farmers to make a profit from their actual labor without government subsidies (handcuffs) and with very limited buyers able to enter the market. I think we are not supposed to remember that not only does the “Federal Reserve” have no reserves, but the entire nation has no grain reserve any longer.

So, now that oil has crashed, it’s time for farm gate prices to crash. 🙂

August 25, 2015 6:00 pm
US farm incomes cut by half as low grain prices bite
Gregory Meyer in New York
©Bloomberg
An extended run of low grain prices will slash US farm incomes by more than half from their peak, the government said, deflating a surge in land values and pressuring fertiliser and equipment makers.
Net income on US farms will total $58.3bn this year, the lowest since 2002 when adjusted for inflation, and down nearly 53 per cent from a record high of $123.7bn in 2013,
the US Department of Agriculture said in a forecast updated on Tuesday.
The sharp decline shows how two years of mammoth harvests and easing biofuel mandates have ended what a University of Illinois expert called a “golden age in
agricultural incomes”, similar to previous ones in the 1910s and 1970s.
Now, farmers, their bankers and investors in land and food production are facing a period of retrenchment.
Land in the fertile Corn Belt region encompassing Illinois, Indiana, Iowa, Missouri and Ohio is down 0.3 per cent this year to $6,350 per acre, according to USDA. Farmers are negotiating lower rents
with reluctant landlords, but adjustments have been modest so far, said
needs corn above $4.10 and soyabeans above $10 to break even at expected crop yields, Prof Schnitkey said.
Livestock prices have also begun to reverse after hitting highs in 2014, pulling down incomes for pig and dairy farmers. CME October lean hogs were 0.66775 a pound on Tuesday, off 29 per cent from a year ago.
Farm expenses will decline by only 0.5 per cent, less than receipts, as rises in labour, interest, taxes and fees partly offset cheaper feed, fuel and fertiliser, the USDA said. The agency’s net income forecast was $15bn less than its previous one made in February.
Ken Wright, president of State Bank of Bement in central Illinois, said farmers were seeing tighter credit lines.
“Most of them were able to build up some cash reserves during the good years, but those reserves are being tapped,” said Mr Wright.
Last week Deere & Co, the equipment maker, forecast a 25 per cent drop in US and Canadian
agricultural sales in 2015. Its shares have fallen 4.8 per cent in the past year.

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3 Comments (+add yours?)

  1. Todd
    Aug 26, 2015 @ 07:35:28

    I find these kinds of reports interesting. What exactly is happening with all these grains that there can be such a huge swing in demand? I don’t eat any more or less per year. People in general eat the same every year. Be it in foods or meat so what changes in grain demand?

    Our local small dairy farm has consistent prices and high demand. The prices are quite high but they have a premium product that we demand.

    Grain prices can drop by half but the flour price stays the same.

    Everything needs to go back to a smaller scale and get the commodity buyers and government out of it.

    Reply

  2. Todd
    Aug 26, 2015 @ 07:38:16

    “October lean hogs were 0.66775 a pound on Tuesday,”

    Hogs are $2-3 a pound locally.

    Reply

  3. truthfarmer
    Aug 26, 2015 @ 07:47:20

    “Everything needs to go back to a smaller scale and get the commodity buyers and government out of it”…That is the genesis of the problem. If we didn’t have all the subsidization and the commodity consolidation, we would have real market based pricing. What we have is completely false economy that generally penalizes production. And too often the people pay the price in quality and cost of product while corporations exploit the consolidation.

    Reply

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