Kansas farmers struggle as corn prices fluctuate
LAWRENCE, Kan. (AP)--Twelve months ago, Overbrook farmer Bernie Faust watched as corn prices started taking off and didn't stop climbing until they reached an astounding $8 a bushel.
"It's what I called a once-in-a-lifetime opportunity to make some of the best money you could make," Faust said.
What a difference a year can make.
This fall and early winter--as fertilizer costs soared and corn prices plummeted--the idea of planting corn didn't seem that attractive.
It wasn't until the past few weeks--when fertilizer prices nearly dropped in half--that Faust decided a corn crop might actually pencil out.
"It's a roller coaster. You don't know which way it's going or how far or how fast," he said.
Every year, farmers in Douglas County gamble when they decide what to plant. This year, farmers are waiting longer before deciding where to place their bets, said Mike Woolverton, Kansas State University Extension grain economist.
In Kansas, about 600,000 fewer acres of wheat were planted this year, the U.S. Department of Agriculture reported. While the fewer acres are partly attributed to a late soybean harvest, farmers also are switching wheat fields to corn or soybean fields.
It's just that many haven't decided whether it will be worth spending more upfront, in fertilizer and seeds, to plant corn rather than soybeans.
"I'd wait until the last minute," Woolverton said.
By nature, farming is an unpredictable business. But Ken McCauley, a farmer from White Cloud, said that in the past few years more than the weather has played into what farmers fetch for corn and other grains.
Global exports, ethanol production and the livestock industry now affect profit margins.
"There are more things out there to make the markets go up than there used to be," McCauley said. "We used to wait on someone to have a crop disaster."
Last year, McCauley planted 80 percent of his fields with corn, a ratio he doesn't intend to change this spring.
With the price of fertilizer so high and price fluctuations in corn and soybeans so drastic, more seems to be at stake this year as farmers decide what to plant, said Kevin Dhuyvetter, a professor of agricultural economics at K-State.
"I think this year the cost of being wrong is a lot more," he said.
Fertilizer prices aren't the only factor affecting corn prices this year. A severe drought in South America could mean a global shortfall in wheat, corn and soybeans--something that won't be clear until they're harvested later this season.
And, ethanol production, which helped corn prices skyrocket last summer, was down by 20 percent in January.
The Kansas ethanol industry hasn't been immune from the slowdown. In October, a plant in Pratt filed for bankruptcy; construction of another plant near Goodland has stalled; and Atchison-based MGP Ingredients Inc., recently announced it would leave the ethanol business.
The industry's prospects are likely to rise with the price of petroleum, K-State Extension agriculture economist Dan O'Brien said.
"We are in a competitive shakeout in the industry. Those that are in a position to weather the financial downturn will probably be well-positioned once the profitability of the industry improves," he said. "Hopefully, it will improve sooner than later."
Ethanol production also could hinge on how closely the Obama administration follows the mandates established by President George W. Bush.
Bush's Energy Independence and Security Act in 2007 called for biofuel production to ramp up to 36 billion gallons in the next 15 years.
"My gut feeling is that with the Obama administration, they are really going to continue to push for renewable fuels," Dhuyvetter said.
David Wulfkuhle, co-owner of Lone Pine Ag-Services, said many of his customers have put off the decision about what to plant.
Traditionally, farmers like to buy fertilizer and seed before the end of the year for tax purposes. But many waited until 2009, hoping the cost of fertilizers, chemicals and seeds would fall.
Also, not everyone cashed in on last summer's high prices; they are still holding onto their corn crop waiting for the value to go back up.
That has left some farmers with little money to spend on this year's planting. In the next few weeks, they are either going to have to find financing or sell the corn.
"I think that is where a lot of people stand," Wulfkuhle said.
As for the land his family farms, Wulfkuhle said that despite the ups and downs of the market they are sticking to their long-standing plan of an even rotation of corn and soybeans.
"We just take the highs with the lows and it should all work out in the end, hopefully," Wulfkuhle said.
Regardless of what global markets are doing, McCauley said, the most important factor stays the same: how much corn you have to harvest at the end of the season. And that unknown depends largely on Mother Nature.
"We still live on the yield," McCauley said. "We'll take all the yield per acre we can get. That is what makes the farmer tick."