Is it a free market at work that causes the price to be what it will be?...Aren't there farm subidizes out the that keep farmers afloat.?....Isn't some of the drop in price because of less gasoline use?..Since ethanol comes from corn and is what 1/3 of the corn crop is used for...I would think that would be a major reason for falling prices..
Local farmers keeping an eye on falling corn prices over the winter
Submitted by Howard Owens on December 18, 2013 - 8:01pm
There's an upside to dropping corn prices -- higher profits for dairy farmers, which is a good thing in Genesee County, but if prices fall much further the impact on corn growers could be substantial.
Today, corn is selling for $4.25 a bushel, which is still high enough for a profit, said Craig Yunker, CEO of CY Farms in Elba. The cost of growing corn, he said, is at least $4 a bushel and as low as $3.50 for more efficient operations, so any further drop in price could put a squeeze on corn growers.
That could be a bigger problem in the Midwest, where corn is often grown on a much larger scale and without the crop diversity common locally.
"I think we could see a range of corn prices from $3.50 to $5.50," Yunker said. "Much depends on the demand in China and depending on the production around the world. At $4.25 we're right in the middle of that range."
The big beneficiaries of lower corn prices are dairy farmers, Yunker noted, and with dairy being a big part of the local ag economy, the current corn price is a big help to some local farmers.
Jeff Post, at Post Farms in Oakfield, agreed lower corn prices help local dairymen.
"A significant amount of our milk checks goes for purchasing feed, so when the corn prices are really high, we're definitely not as profitable," Post said. "We're fortunate that we grow a lot of our own corn, so we haven't had such a steep swing (in profits), but not every dairy farm can grow its own corn. Farms that rely on buying a lot of corn grain, it definitely has a bigger impact."
It would help, Post said, if soybeans would drop in price (soy being the key source of protein for dairy cows).
"From what I'm seeing, it's not trending down," Post said.
Corn has been in a bit of a bubble the past two years, trading for a period at more than $6 a bushel. What's happening now is likely a predictable market correction.
"We're coming back to normal," Yunker said. "The last two years have really been abnormal."
The big fear in the Midwest, where corn is king, is that farm land prices could see a big drop in value, threatening some farmers with insolvency.
It could mean the kind of farmland price bubble experienced by farmers in the 1980s, according to media reports.
Yunker doesn't see that kind of collapse coming, however.
"Farmers were much more leveraged (in the 1980s)," Yunker said. "When prices started to fall, there were no buyers for farmland because everybody was leveraged and couldn't buy. Now farmers are more balanced. There will be buyers because there are farmers who are healthy."
Locally, corn prices will have a minimal impact on farmland prices.
Post noted the same land in Genesee County that might grow corn can just as easily grow other produce.
Yunker, whose farm is diversified in what it grows every season, said he and his managers won't decide on the coming season's crops and how many acres of corn to plant until February. That will give him a lot of time to study what's happening in the international markets.
The big factors, Yunker said, are what happens in China and how the corn growing season does in South America and how much the Ukraine produces.
But the biggest factor is how much demand for corn there is out of China. That demand is effected both by how much meat the Chinese eat and how widely disease spreads through China's chicken farms.
If Chinese demand for corn drops, so will prices.
Recently, China rejected some shipments of corn, reportedly because of an assertion that the corn was genetically modified in a way not approved by China. Yunker doesn't think that's the real reason.
"I think it's because the prices went lower," Yunker said. "They're finding a reason to kick the load now. It's always a problem when prices go lower. People find a reason not to accept what they purchased."
If prices drop below $4 the impact on local farmers could become more severe because the cost of production is relatively fixed. It's a price local farmers will be watching closely over the winter.
"A lot depends on the demand in China and it depends on the production around the rest of the world," Yunker said.
Mark subsidies are usually paid for farmers not to plant in order to drive the price up, not so much keep the farmers afloat. Either way they are an example of Government trying to control the market and that is inherently bad in the long run.
Contrary to popular belief, the small farmer usually benefited more from subsidies, larger farmers do exactly what the Yunkers discussed. They have more flexibility to adjust what crops they plant and in what acreages.
This article is really all about the free market and world purchasing trends. The reason why the US is so affected is because the US, Brazil and the Ukraine are the largest producers of corn and the vast majority of our corn is shipped overseas, primarily for livestock feed. Therefore it affects other economic sectors as well when the price drops.
CY Farms received over $1.6 million in subsidies courtesy of US taxpayers the last 17 years.
$1.6 million plus
Whose foolin who?