The U.S. Department of Agriculture's big show last week, the annual Outlook Forum, began as usual with an economic assessment of the farm economy by chief USDA economist Robert Johansson.
He leveled with the hundreds of global ag economists and farm policy specialists, saying, “Falling net farm income is largely the result of falling commodity prices, productivity is outpacing population growth and food demand. Looking forward, net farm income is expected to remain flat over the next ten years and, when accounting for inflation, to fall in real terms. The most recent update to this outlook for 2018, released two weeks ago by ERS, shows the expectation for 2018 to be even lower, with a fall in net farm income in 2018 to $59.5 billion.”
The $59.5 billion projection for 2018 net farm income is half of what it was five years ago, through no fault of any American farmer. The agricultural economy has cut farm family budgets in half, causing farmers to burn though equity to finance annual crop production expense and hear lenders tell them their working capital is too low and refinancing is not an option.
Farmers have been fabulous at crop production, with corn and soybean yields setting records the past five years. Unfortunately, that is the problem, as noted by Johansson, who said “productivity is outpacing population growth and food demand.” And he added, “Since 1960, soybean production has increased more than 1,000 percent, while real soybean prices have fallen by 47 percent. And corn production has grown by more than 400 percent and prices have fallen by more than 60 percent.”
Every farmer hopes for a crop failure, anywhere but on his farm. There is one underway in Argentina, resulting from a La Nina-driven drought. But increased production in neighboring Brazil will offset the shortfall, and the poor Argentine crop will not bail out the U.S. farmer.
The Argentine issues have caught the attention of the grain traders, both commercial and speculative, around the world, and there has been a 20-cent increase in corn prices (5 percent) and a 66-cent upswing in soybean prices (6 percent). While conventional wisdom says the threats to the Argentine crop would generate a larger increase in futures prices, there has been an aggravating factor afoot. Speculators had held near record futures and options positions that were betting prices would go lower for both corn and soybeans. And when prices rose because of the potential crop shortfall, farmers began unloading their grain bins truckload after truckload.
Was that the right move for cash strapped farmers in today’s market? For some, you bet! For others, not so much. No matter which farm operation would be examined, the financial position would be entirely different from a neighbor and from everyone else in the township.
Farm decisions are based anywhere from individual gut reactions to sage advice from a cadre of advisors. But it is that farmer in the middle, who tries to make wise decisions for the best choice for his family and the future of the farm who can best benefit from various assistance that is available.
One of those will be the Farm Bill, even though its outcome is politically speculative and may be many months away. Congress has discarded the White House proposals and will be voting this year.
A more immediate form of help can be summoned, and carried by experts in financial, legal, marketing, agronomic and tax issues. With a dinner table conference in the farm home, such a board of directors can provide immediate and long-term assistance to farm families beset with challenges that would be insurmountable without such help.
And a third helping hand can be joining neighbors and friends at a marketing club meeting to get reliable information about market trends, as opposed to unsolicited Internet opinion. Such groups listen to experts, refine their breakeven prices, and learn about marketing tools that would make a lender happy.
By the way, if the latter concept seems attractive, the Central Illinois Marketing Club meets at 6:30 p.m. Tuesday, March 6, at in the GSI Shuler Center at Assumption. There is no charge to attend and the speaker will be University of Illinois marketing specialist Todd Hubbs. See you there!