The first substantial drop in corn prices this summer set off a flurry of texts to my phone predicting the beginning of the end.
Financial experts espoused dark theories about plummeting farm profits. They used numerology to show how in history, when markets recorded significant gains for successive months, the years following were lousy.
I don’t like theories about agricultural apocalypse. Too many people forecast doom and gloom based on loose arguments. Today there are more variables impacting agriculture than ever before (ethanol, China, weather, etc.) that render pat comparisons with the past useless.
Nevertheless, what goes up must eventually fall. Today’s market is fast-moving, and we must be ready to ride it up or down. Profit-taking should be used to strengthen businesses against ongoing volatility.
"Typically, farmers aren’t interested in spreadsheets and managing margins unless corn is $3 and inputs are sky-high," noted Chris Barron at our Top Producer Summer Seminar (see highlights). Barron is vice president of Carson & Barron Farms and the expert behind "Ask a Margins Expert" on AgWeb.com. "When times are good and corn is $7, well, that is exactly when you should be working on your bottom line," he said.
Preparing for a downturn in profits is different than fearing a downturn. Farm Journal Media is making an effort to help farmers prepare for when the bottom inevitably drops out and for riding this market up and down. Watch for articles in our magazines and online and shows on "Ag Day" television tagged with the logo Ready for the Ride. Start by gathering some perspective in the article "Don’t Look Back".
Weather- and Market-Weary. Speaking of rides, USDA’s June 30 planting estimate sent farmers on a rocky one when it found more acres than plausible given spring weather. The National Agricultural Statistics Service now must resurvey key states.
Mother Nature just hasn’t been nice. North Dakota farmers face a $1.1 billion loss in revenue from acres that could not be planted due to flooding. Along the Mississippi River, farmers still fight for reclamation. Former Top Producer of the Year Donny DeLine lost 2,500 acres, and one of his fields near Memphis is now an island in the river. He doesn’t expect much compensation for his loss.
Down south, an "exceptional drought" by U.S. Drought Monitor standards is choking acres from Texas to the Atlantic, potentially affecting 1.3 billion bushels of corn and 500 million bushels of soybeans.
The updated acreage numbers are anxiously anticipated, but in the end harvested acres are more important. Be mindful, however, of those farmers who have no hope for harvest.
- Summer 2011