Weathering the storm
By Jennifer Carrico
U.S. Department of Agriculture says average corn prices for 2013-2014 will be at $4.40 per bushel, nearly $2.50 per bushel lower than the ending average price for the 2012-2013 crop. Iowa farmer Jerry Mohr says this will make him change a few things at his farm.
"We are fortunate to have more tools now to help us save money when needed," said Mohr. "With precision agriculture, I try to put specific nutri-ents on exactly where they are needed in order to prevent any wastage."
Mohr is also sure to make purchases of inputs when a discount is available. In a year like 2014, he thinks that will be important for farm-ers to save extra money.
"We purchased seed corn in December to take advantage of the dis-counts and save some extra money since we won't be getting quite as much when we sell the new crop," he said.
Mohr finds several ways to save money in years with a very small profit margin. He started farming in 1974 and said he had a few good years of farming before the tough economic conditions in farming in the 1980s.
"The next couple years will be hardest for the young farmers just starting out who have purchased high-priced land," he said. "Over the last three to four years I have tried to pay as much debt as possible and replaced machinery so we could weather the storm when it comes."
Mohr said unless there is a drought or weather issue he expects to have a good growing year in 2014. His 2013 soybean crop suffered because of a lack of moisture when needed, but his corn crop was actually better than average since he had cool weather in August and warmer weather in September.
Mohr used to feed livestock as well as grow crops. He fed hogs until 1999 and cattle until 2004. He said from 1981 until 2001 they were always juggling what part of the operation would make money—crops or live-stock. When they finally sold out, the money was invested in the stock market.
"We don't always make money in the stock market either, but it seems to have less risk than the livestock," he said.
Purdue University agricultural economist Chris Hurt said an expand-ing livestock sector could add value to corn in the coming months, which would be a welcome increase for corn and soybean growers who saw prices fall in the coming months.
However, he said it could take several months before the effects of the expanding livestock sector will be seen in the grain prices.
"Feed prices are expected to move into a period of moderation over the next several years, which means lower livestock production costs, and increases the likelihood that livestock producers will continue expansion," said Hurt.
Mohr said in the 40 years he has been farming, he has seen that when corn is cheap for too long then livestock eventually become cheaper too.
"The ethanol industry brought the cattle industry back to Iowa," said Mohr. "Now lower corn prices will allow the cattle industry to rebuild."
The cattle industry is expected to expand, according to Hurt. Higher heifer retention was expected to have started in the fall of 2013. However, continued dry conditions and poor pasture conditions across cow country will make the expansion of the beef herd slow in 2014.
Hurt expects an increase in pork production to start in late summer 2014, with big profits for hog producers during the 2013-2014 corn marketing year. Lower feed prices will help provide profitability for hog producers.
"A growing hog industry, while helpful in providing additional demand for corn, won't be enough on its own to boost corn prices to previously high levels," said Hurt.
Mohr said an expanded livestock industry will give more demand in the feed sector, but he thinks the export market and the continuation of the Renewable Fuels Standard will also help keep the corn prices from dipping any lower.
Management of all areas of the farming operation is important in years of smaller margins. Mohr said many farmers had forward priced corn into 2014 and will still be selling it for $6 per bushel.
"I'm more concerned about farmers in 2015. Many will be able to make it through 2014, but the following year is when management will be very important," said Mohr.
He uses budgeting in lower profit years, paying property taxes, health insurance and income taxes first and then making cuts back in other areas where needed. Instead of purchasing equipment, he makes repairs.
"Thankfully with all the advancements in technology, we, as farmers, are better able to do our job more efficiently. This year, that will really matter," said Mohr.
Jennifer Carrico can be reached by phone at 515-833-2120 or by email at firstname.lastname@example.org.