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A good year for Nebraska ag industry, economist says
PLEASANTON, Neb. (AP)--Is it possible for a grain farmer not to make money this year? Nothing is certain because individual businesses are different, said Matt Stockton, an ag economist at the University of Nebraska West Central Research and Extension Center in North Platte. "But it's gonna be very difficult to lose money this year" if a farmer harvested the right yields and didn't incur a lot of new costs. Stockton said worries that higher corn prices would sink profits for cattle producers didn't turn out as bad as expected, partly because of the availability of distillers grains as a co-product from ethanol processing. "Who would have thought we'd still have about a dollar per pound for fed cattle?" he said. "You can imagine (the profits) if corn wasn't as high." Pleasanton farmer John C. Martin agreed there should be profits for grain farmers this year, with net profits for wheat and soybeans possibly higher than for corn. "Not that corn is cheap," he added. "But by comparison, it hasn't kept up." A recent spot price for corn was $3.15 per bushel. One year ago, that price was $2.80. Input costs, especially energy and fertilizer, were higher. But they should be more than covered by the higher market prices, he said. Martin, 38, has been farming full time since the early 1990s. "I was in about my sophomore or junior year at the University of Nebraska (Lincoln) and my father and uncle had the opportunity to purchase some more land about then," he said, which was an incentive to come home. He now farms in partnership with his younger brother Charles and they work for their dad, John, and uncle, Lynn, in exchange for the use of farm equipment. The elder Martins are farm partners. The family has about three times more corn than soybeans; some wheat, pasture and alfalfa; and background feeder cattle that are fed during the winter and grazed during the summer. As he drove the family's combine recently through a dryland soybean field southeast of Pleasanton, John C. Martin said they don't "fertilize for yields" on corn and didn't change crop rotations to take advantage of high demand and high prices for corn in 2007. "With the continuous corn cropping system, it delays some of the spring field work," he said, so having several crops allows more flexibility in case of weather issues. Also, soybeans and wheat can be grown on fields that are dryland or have limited water. "And part of our philosophy is diversity," Martin said. There's "wiggle room" built in for adjustments, but no wide swings in farming plans from year to year. Stockton said such an approach recognizes the age-old fact that farm costs and prices are variable. "Right now, everything has been looking pretty good," he said, including wheat and milk prices reflecting high demand and low supplies worldwide. "That's a coincidence or a series of events that created this situation." But will those same events repeat in 2008 or beyond? Stockton said people should remember what happened in the 1980s, when fencerow-to-fencerow planting was done in anticipation of continuing prices high enough to retire growing debt. The lesson learned the hard way was to manage conservatively, because it's not known what will happen in a year or two. "It's not a bad idea to pay off your equipment," he said about what to do with farm profits this year. "It could be a bad idea to incur a lot more debt. ... Be careful. Think about it. Be sure of the risk you're taking." Stockton recalled being asked by a cattle producer about the best insurance against drought. "Money in the bank," he replied, which allows ag producers to survive a bad year or two. Good marketing choices are critical when prices are high because the government safety net isn't activated, he said. So how much grain should be forward contracted? "That's like asking, 'How do you comb your hair?'" Stockton said, because each situation is so different. "If you can make money, make money," he advised, and don't wait and hope that markets get better. "Then don't worry about what could have been." Date: 10/31/07
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