For farmers facing yet another drop in farm income this year, April’s rally in corn and soybean prices might just have brought almost profitability within reach.
As of midday on Thursday, soybean futures for May, July and August were up more than 13 cents to prices between $10.32 and $10.41. Corn also was up between 5 and 6 cents, pushing May, July and September futures prices to between $3.87 and $3.90.
That’s helpful for corn farmers and great news for soybean farmers. According to Gary Schnitkey of the University of Illinois, 2016 “prices must be above $4.20 for corn and $10.25 for soybeans before financial position stabilizes on typical grain farms. These price benchmarks are based on yields at expected levels. If yields are lower than expected, prices will need to be above $4.20 for corn and $10.25 for soybeans. The opposite is true as well: higher yields could result in benchmarks being below the above prices.”
Those qualify as “more optimistic prices,” compared to earlier this year, when USDA in February predicted 2016 prices of $3.40 for corn and $9 for soybeans. And, based on farmdoc Daily’s profile of a typical central Illinois grain farm with 1,500 acres and a mix of owned and rented ground, they will allow farmers a chance at breaking even or even a small profit this year.
“More optimistic prices of $4.20 per bushel for corn and $10.25 per bushel for soybeans result in net income of $55,425 per farm. These prices roughly yield financial stability: farms are not losing working capital but are not building much either.”
Could the situation continue to improve? Perhaps, but we need to get deeper into the growing season and see how this year’s crops develop, according to Schnitkey.
“A critical time will be in August when 2016 yields and prices come into clearer focus. If prices are below the $4.20 corn and $10.25 soybean benchmarks, cost cutting will continue to be important to avoid continuing large losses to working capital in 2017. In particular, below $4 corn prices and below $9 soybean prices will result in the extreme need to reduce costs as working capital likely will be very limited on most farms. August is particularly crucial because many of the 2017 cash rent and input decisions begin to be made.”