If you ever encounter an average year, be sure to let us know. Just about every U.S. ag producer this year had too much rain or not enough, along with more market instability than they care to recall.
Harvesttime wet weather made getting quality Corn Belt crops in the bin a challenge and devastated cotton and soybean producers in the mid-South. At the same time, severe drought in South Texas meant some farmers harvested no crops at all. In California's San Joaquin Valley, farmers lost an estimated $703 million because of the state's ongoing water difficulties.
These problems make it critical for farmers and ranchers to get on solid footing in 2010. That could be tricky. Most economists predict another year of volatility is ahead.
The weak dollar should help agricultural exports but could push prices of inputs, such as fuel and fertilizer, higher. If the economy turns around, the livestock sector could benefit, but the latest jobless figures indicate that may not be in the cards anytime soon.
One thing is certain. 2010 is not the year to be an average farmer. Purdue University figures indicate that an average 1,000-acre corn and soybean farmer will lose $80 an acre next year; an average 3,000-acre farmer will see a $50 per acre negative return. That means it pays to be better than average.
To get there, push production and try to reduce indirect costs, such as land rent, labor and machinery, recommends Mike Boehlje, Purdue University ag economist.
"From 2007 up to parts of 2009 was an aberration. But we're not back in the tank. It's not as though the average producer can't cover cash costs. Maybe they're not able to cover depreciation allowances or labor charges paying for their time. But 2003 through 2005 were not flush times, and we didn't see many farmers go out of business. If you can get another 5 bu. or 10 bu. of corn or lower your fertilizer cost, it doesn't take much to offset the negative margin. Good farmers can still do well,” Boehlje says.
"You didn't have to have the best management skills in 2008 to make a reasonable amount of income. With margins like the ones we're facing, management skills are going to make the difference,” Boehlje says.
The theme for 2010 is to take a profit when the market offers one and trim costs however you can without hurting production.
"I've already sold half my 2010 corn at $5 per bushel. I have tanks full of $175 liquid nitrogen, a third or fourth of what it was at its peak. I renego-tiated some of my leases. And I have multi-peril crop insurance. So I feel really good about next year,” says Lon Frahm, who farms in Colby, Kan.
As he combined late high-moisture soybeans, Ray Gaesser of Corning, Iowa, said he's been taking proactive steps toward 2010 for several months.
- December 2009