By Dennis Minich
If the annual projections hold true, this might not be a great year to be a farmer.
Speaking at the 95th annual Cass County Soils and Crops Conference, John Kruse, the State Specialist in Agriculture Business and Policy with the University of Missouri Extension Office, said a number of signs indicate lower prices for significant crops in our area.
“We have limited updates, since the government has been closed down since Dec. 24, so it is harder to piece together projections. Any growth will depend on the export markets, so there could be some volatility, but overall there will be issues,” he said.
The two predominate crops in the area, corn and soybeans, could both see major drops in prices.
“Last year there was a drought in Argentina, so corn prices improved, but this year Brazil and Argentina are both back up, so that will reduce demand for U.S. crops,” he said.
“South America responded to our trade war with China by increasing the acreage of soybeans. Supply has also increased because of more planting in the U.S., so supply is outpacing demand about five to one.”
Kruse noted that because of the trade war, China had not been purchasing U.S. soybeans until about three weeks ago. Unfortunately, the South American crop will hit the market in about a month, again decreasing U.S. demand. Kruse noted the drop in sales to China is not just because of the trade war, but also because of outbreaks of African Swine Disease, which has required the destruction of many herds of hogs, reducing the need for feed.
In recent years, soybeans had been selling in the $10 to $11 per bushel range. Kruse said current prices are around $9.60, and prices were as low as $7.85 last month. While the trade war is having an immediate negative impact, Kruse said if it forces China to drop some of its import taxes on U.S. products, it could significantly help U.S. farmers in the future. He noted China mostly buys cheaper pork products but puts a 60-percent tariff on U.S. imports. For soybeans, it is 28 percent and, although not a big buyer of beef, the tariff is 37 percent.
The largest importers of U.S. corn are Mexico and Japan. China has an oversupply of corn so is not buying. About half of all corn grown is used for ethanol and the U.S. exports about 22 percent of its corn either directly or indirectly for ethanol use. Supply is again an issue as ethanol supply is about three times greater than demand.
“We could see some supply shifts, but we are not going to see growth like we have in the past 10 years,” Kruse said. Corn is expected to sell in the $3.25 to $3.95 range, which is similar to last year.
The falling commodity prices will also have an impact on pork and beef. He said the retail prices of meat have held steady, which helps the market, but there is still a major oversupply of pork.
Hay prices are up because of the continued drought in Texas and Oklahoma.
On the cost side, Kruse said fertilizer costs will be up about 10 percent, and while diesel remains high, there was some easing of prices in December. The long-range weather forecast is for above average moisture, but there is no solid prediction on temperatures. All the news added up to a suggestion that farmers should find ways to increase profitability.
Kruse said farmers should look into “value-added” products, such as other fruits and vegetables or organic eggs. Also of note, the number of farm families with members working off the farm is increasing.
For the consumer, Kruse said most of the forecast will have little impact at the grocery store.
“When you talk about the producer, that is a very small percentage of food cost. The farm cut on the average dollar for food is about 19 cents, so what we are talking about won’t be noticeable,” he said.
Kruse’s remarks were the finale of the day-long event, which featured speakers on a variety of farm topics.
For the 94th consecutive year, lunch was provided by the Harrisonville Kiwanis Club.
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